KEY POINTS:
The kiwi dollar could fall further today following a plunge over the weekend and the local sharemarket will start the week on the back foot with a second steep fall on Wall Street on Friday night likely to drag it lower.
The New Zealand dollar dropped nearly 2c from Friday's local close to as low as US76.35c on Friday night in New York trade and closed at US76.55c.
It has now dropped 5.6 per cent from its post-float high of US81.06 last week as ongoing concerns about the collapse of the subprime lending market in the US prompted investors to take their money out of high-yield currencies like the kiwi, which are perceived as being more risky.
"The market's going to start off tentatively," said ANZ senior currency dealer Alex Sinton.
The currency could drop to US75.75c today if concerns continued about the quality of loans in the US, and regaining much of the losses this week was unlikely, he said.
The sharemarket will probably add to Friday's 2 per cent fall after another drop in Wall Street on Friday night.
But Macquarie Equities director of investment Arthur Lim said it was unlikely the NZX-50 would fall as much as the Dow Jones industrial average, which dropped 1.5 per cent on Friday. That was because the Kiwi market's gains this year have been more modest than overseas markets. Before its two-day plunge, the Dow was up 12.3 per cent, compared with gains of just 6.6 per cent for the NZX-50 before Friday's fall.
Also, he said, the possibility that liquidity could dry up and end the current takeover boom could hurt other markets more than New Zealand.
The fall in the New Zealand dollar would usually be expected to help export stocks such as Fisher & Paykel Appliances, Fisher & Paykel Healthcare, Pumpkin Patch and Sanford.
But Lim said that might not hold true today. "There will be an element of watch-and-see whether this time around the fall will be sustainable."
