Euro worries weaken kiwi

File photo / Dean Purcell

The New Zealand dollar dropped to its lowest level in 10 days as worries about possible euro zone sovereign debt restructuring continued to drive a broad pullback from risky trades in commodities, stocks, and high-yielding currencies.

The NZ dollar was at US78.44c at 5pm from US78.45c at 8am and US79.29c at 5pm on Friday. It traded as low as US78.26c yesterday.

The NZ dollar was little changed at €0.5564 at 5pm from €0.5577 at 8am, having reached a 12-week high against the European currency above €0.56 early on Friday.

"We await the Budget this week. It will be the track of the debt reduction that will be critical, and will determine the response from the credit rating agencies," Rankin Treasury said.

ANZ economists said the Budget on Thursday would do enough to avert a credit rating downgrade for now.

"But we doubt that S&P and Fitch will remove New Zealand from negative outlook until more inroads are made into the country's large net external liability position."

Rankin Treasury said that both European and United States debt levels were worrying investors but they seemed only able to focus on one country at a time.

The euro has been around six-week lows against the US dollar and the yen on renewed concerns Greece may restructure its debt, while the US dollar rose to a five-week high against major currencies.

European Central bank President Jean-Claude Trichet also contributed to the euro fall as he dampened expectations about interest rate rises in the euro zone by saying that inflation was at its peak.

The NZ dollar dropped to A74.32c against the Australian dollar at 5pm from A74.55c at the same time on Friday, having hit a two-week high A74.85c early on Friday. The NZ dollar was at 63.44 from 63.87 on Friday. The trade weighted index was at 68.23 from 68.65.

- NZPA