NZ dollar sinks on European fears

File Photo / NZ Herald

The New Zealand dollar tested support at its lowest level in a month against the greenback, as investors once again shunned risk amid growing fears about the euro zone's debt crisis.

The NZ dollar was plumbing lows as the domestic session ended and it was not alone as the Australian dollar was also weak today.

The NZ dollar was at US74.83c at 5pm, from US75.05c at 8am and US75.95c at 5pm on Friday. It had dropped to US74.75c on Friday night.

"European sovereign risk remains centre stage for all markets and the euro remains under steady selling pressure as a result," Rankin Treasury said.

The NZ dollar fell more than US3c last week on worries about Europe and also after a surprise downgrade of New Zealand's credit rating outlook by Standard & Poor's.

The local currency remained weak even though confidence rose in the November National Bank business outlook survey released today.

News that New Zealand's annual trade balance showed a surplus above $1 billion for the first time in 16 years in the year to October also did not lend support today.

Figures from Statistics New Zealand (SNZ) today show the country had a trade deficit of $319 million in just the month of October, amounting to 8.7 per cent of the value of exports, compared to an average deficit of 29 per cent of exports over the previous five October months. The October trade balance has always been in deficit.

ANZ bank said the figures showed high commodity prices were supporting the economy.

Export prices and volumes could now deteriorate, with growth in many of this country's key Asian trading partners slowing sharply in the third quarter, while poor spring conditions in this country were not boding well for agricultural export volumes in the next year.

The euro fell to its lowest level in two months against the dollar today as the focus turned to Spain and Portgual's debt levels after the bailout of Ireland.

The NZ dollar was at 0.5653 euro at 5pm from 0.5698 at the same time on Friday.

It was at 62.92 yen from 63.58 yen at 5pm on Friday and at A77.62c from A77.90c.

The trade weighted index fell to 68.10 from 68.72.

- NZPA