Kiwi dollar may fall to 72c - experts

The kiwi dollar is ending its upward move, experts say. Photo / File

NZ currency heading for US72c unless economic data from Europe and US turns positive, say experts

The New Zealand dollar, which hit a post-float high of US88.43c last month, could fall as low as US72c against the greenback over the next few weeks, a currency expert says.

The kiwi suffered a heavy sell-off overnight Thursday amid renewed fears over the health of major world economies, falling from above US82c to below US78c yesterday morning. It was trading at US78 at 5pm last night.

Global equity markets also fell sharply yesterday, with the US' Dow Jones falling 3.51 per cent.

New Zealand's NZX-50 fared better. It was trading 1.71 per cent lower at midday, but recovered to close down 0.89 per cent yesterday.

Westpac senior markets strategist Imre Speizer said any news that suggested a resolution to Europe's sovereign debt crisis could stem the New Zealand dollar's fall towards US72c. But such news was unlikely.

"For the next month I don't expect any positivity from policy makers and therefore from markets," Speizer said.

He said an indication from the US Federal Reserve that America's economic outlook looked bleaker than initially thought was the biggest driver in the New Zealand dollar's plunge against the greenback.

Negative economic data came from other parts of the world, with a survey in Europe indicating a recession could well be on the cards.

A Chinese manufacturing survey also raised the prospect of a slowdown in the Asian superpower.

Finance Minster Bill English told Radio New Zealand's Morning Report programme yesterday that the New Zealand dollar had been too high for too long.

"That exchange rate is coming back," he said.

"Provided it does not drop precipitously, having it come back into the (USc) 70s will give our exporters, who are under pressure, some relief and the prospect that we can look forward to more growth in the future from exports, because the high exchange rate has been a strong head wind for the rebalancing that needs to happen in our economy."

ExportNZ executive director Catherine Beard said exporters would welcome the New Zealand dollar dropping below US80c.

"A very small movement [in the cross rate] can equate to millions of dollars for exporters, depending [on] what business they're in," she said.

But Beard said companies would be concerned that the New Zealand dollar could soon return to higher levels against the greenback.

Speizer said that if the fears driving the sell-off of risk currencies like the New Zealand dollar turned into reality, that could be bad news for this country's economy.

"I suppose what the aussie and kiwi currencies are saying is that if the global outlook continues to deteriorate it's not just going to be a debt crisis, it's going to be a global economic crisis again."

Kevin O'Sullivan, head of financial markets at Auckland's OMFinancial, said the sharemarket's volatility was likely to continue into next week.

"People were looking for the light at the end of the tunnel and the tunnel's suddenly got longer."