Risk aversion kept the New Zealand dollar under downward pressure yesterday as markets reeled from the United States' credit-rating downgrade and concerns about Italy and Spain's sovereign debt woes began to mount.
Foreign exchange strategists said the kiwi was being driven by risk factors alone and not by value considerations in the wake of America's credit rating downgrade on Saturday.
Sharp falls in major stock markets around the world suggested investors were shunning risk in favour of other instruments, such as gold. By late yesterday, the kiwi was trading at US82.82c, well down from last week's post-float high of US88.42c and down from its session high of US84.43 earlier in the day. Ironically, the US dollar was holding quite well on its trade weighted index, at 74.30 from 74.60 just before Saturday's downgrade.
Westpac currency strategist Imre Speizer said the New Zealand dollar came under selling pressure as markets reopened, and promptly fell after Saturday's rating news.
"The downgrade overall was, and is, negative for the kiwi," he said. "Global risk appetite gets hit, and the kiwi falls when risk appetite falls, so that has been the dominant feature."
