NZ dollar falls on Euro debt fears

Photo / Dean Purcell

The New Zealand dollar fell, following global equity markets lower as rising euro debt fears dimmed investors' appetites for growth linked currencies such as the kiwi and Australian dollars.

In New York on Friday, the Standard & Poor's 500 Index fell 0.8 per cent to 1337.77, its second weekly decline in a row, while in Europe the benchmark Stoxx 600 Index fell 0.5 per cent to 280.50.

That came amid fears Europe's other heavily indebted countries will request another look at their bailout packages if Greece's debt gets restructured.

A restructuring of Greek debt is looking more likely after a report out on the weekend showed Greece's budget deficit is expected to exceed the limit imposed under its bail-out terms, at 9.5 per cent of GDP.

"Further failed topside attempts to close out the week for the New Zealand dollar proved to be telling as US dollar momentum drove it lower," said Alex Sinton, a senior currency dealer at ANZ New Zealand. "Leading the move was the euro, despite surprisingly positive first quarter GDP releases."

The kiwi recently traded at 78.37 US cents, down from 79.37 cents on Friday, and fell to 68.16 on the trade-weighted index of major trading partners' currencies from 68.48.

It was little changed at 74.14 Australian cents from 74.19 cents last week, and declined to 63.32 yen from 63.91 yen. It climbed to 55.67 euro cents from 55.48 cents on Friday, and dropped to 48.33 pence from 48.70 pence previously.

Global commodity prices were little changed, with the Thompson Reuters Jefferies CRB Index, a measure of 19 commodities, slipping 0.01 per cent to 338.53. Currency traders will be closely watching the impact of the floods in Mississippi on soft commodity prices.

The kiwi may trade in a range of between 78.25 US cents and 78.95 cents, Sinton said, with the lower support level expected to be tested once Asian markets open.