Kiwi dollar slides on recession talk after grim survey

The New Zealand dollar fell sharply in overnight trading as traders dumped the kiwi in the wake of a grim survey showing business confidence collapsing to a 20 year low.

The kiwi fell below US69c overnight, over one cent below where it had traded 24 hours earlier. It was also well down against the Australian dollar, trading at A91.85c from A92.50c before NZIER's Quarter Survey of Business Opinion was published.

BNZ chief foreign exchange dealer Mike Symonds said the survey had prompted the selling, particularly against the Australian dollar.

He expected the kiwi to trend down, particular on its trade-weighted index, measuring it against the currencies of its five main trading partners.

He said his bank had seen some significant sellers of kiwi dollars against the Australian dollar as well as the US dollar.

"It's clear that in terms of fundamental bias in terms of kiwi versus its major rivals, in this case the aussie, we are going to see kiwi in time weaken.

"Increasingly, people are of the view that the risks to the economy are on the downside."

Today's Consumer Price Index would be important. A rise in the quarterly index below 0.8 per cent would see the kiwi sold further as fears of another rate rise next week dissipate.

Mr Symonds said economists were now expecting New Zealand's growth to be around 1.5-2 per cent with risks that it would fall below that. Economists expect Australian growth at around 3 per cent.

NZIER director Brent Layton said the survey suggested GDP growth was negative in the December quarter and pointed to another negative result this quarter -- equating to a recession.

Mr Symonds said the survey showed that some of the capacity indicators were coming off the boil and that would ease the Reserve Bank's concerns.

It was clear the corporate sector would lead the slowdown and that would have implications for hiring and wage inflation, he said.

- NZPA