After a quiet day's trading the kiwi slumped against the greenback late this afternoon, following comments on the New Zealand economy by ratings agency Standard & Poor's.
After almost pushing through the US69c mark overnight, the kiwi dropped under US68c by the end of today's local session.
At 5pm it was fetching US67.86c, from US68.78c at the same time yesterday and an overnight high of US68.97c.
S&P said the risks on New Zealand's AA+ rating had increased in recent months with the current account deficit getting bigger and a general weakening of the outlook for the New Zealand economy.
A spokesman for S&P told NZPA there was still a stable outlook on the AA+ rating.
"We don't think the rating is going any time soon, it's just that the risks have increased," he said.
BNZ currency strategist Sue Trinh said S&P's comments again talked about the risk to the New Zealand dollar from the large current account deficit and also made mention of downside risks to New Zealand growth.
"The kiwi slipped about 40-50 points immediately in the aftermath," Ms Trinh said.
She said it was a violent move down on not much new news.
"It just underscores how vulnerable the kiwi is, and how cognisant the market is of the medium term weakness of the kiwi. They are going to be very quick to punish the kiwi, all they are looking for is a trigger," she said.
A speech by Reserve Bank governor Alan Bollard to the Canterbury Employers' Chamber of Commerce in Christchurch had much less impact on the currency. Dr Bollard reiterated it was too early for interest rate cuts, saying the economy was not yet soft.
"We have yet to see house price pressure coming off. An early decline in interest rates would ignite spending," Dr Bollard said.
Yesterday Dr Bollard left the official cash rate unchanged at 7.25 per cent. He indicated the tightening cycle was probably over but said there was no prospect of an easing.
The release overnight of the ANZ-Business NZ Performance of Manufacturing Index (PMI) for December added to the gloomy economic outlook of late.
The index declined to 46.7 -- the lowest reading since the survey began in 2002 -- from November's 52.3. A reading below 50 indicates manufacturing is contracting.
Against the Australian dollar at 5pm, the kiwi was fetching A90.47c from A91.15c at last night's close.
The following are Reuters currency rates:
5pm today 5pm Thursday
NZ dlr/US dlr US67.86c US68.78c
NZ dlr/Aust dlr A90.47c A91.15c
NZ dlr/euro 0.5568 0.5612
NZ dlr/yen 79.06 79.41
NZ dlr/stg 38.17 38.50
NZ TWI 69.20 69.77
Australian dollar US75.16 US75.39
Euro/US dollar US1.2211 US1.2253
US dollar/yen 116.23 115.62
- NZPA
<EM>Currency</EM>: Kiwi slumps on S&P comments
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