The New Zealand dollar fell against the euro on speculation Spain will seek a bailout after its credit rating was downgraded and increased demand at an Italian bond sale spurred bets the region's debt crisis is easing.
New Zealand's currency dropped to 63.23 euro cents at 8am from 63.55 cents at 5pm yesterday. The kiwi was little changed at 81.78 US cents from 81.80 cents. The trade weighted index was largely unchanged at 72.98 from 73.01.
Rating agency Standard & Poor's cut Spain's credit rating to one level above junk, fuelling speculation the indebted nation will be forced to ask for a bailout sooner than expected to allay concerns Europe's debt crisis is spreading. The Italian government drew solid demand for its auction of three-year debt, selling 3.75 billion euros. Equity markets in Europe rallied following the news, with France's CAC 40 up 1.4 per cent and Germany's DAX 30 rising 1.06 per cent.
"Ultimately Spain should request a bailout and just get it done but there is a whole political game going on," said Stuart Ive, currency strategist at HiFX. "Everyone is saying take the money and they are refusing to do so but they do have time on their side."
"Today we will see the cross consolidate and see if it gets up to 63.35 euro cents as the overnight session kicks in - over the next week though it will probably drift lower," Ive said.
