The New Zealand dollar fell to a new five-month low today as sentiment turned more deeply negative in the wake of this week's ugly current account and GDP data.
At 4pm, the kiwi was buying US67.25c, the lowest level since July. Most of the damage was done yesterday when it fell nearly a cent to US67.37c following weaker than expected September quarter growth of just 0.2 per cent.
Forex dealers warned the kiwi could go into a freefall in the New Year, as a string of weak economic data weighs the currency down.
Hedge funds have gone heavily short New Zealand dollars on the expectation the currency will fall and are likely to encourage a disorderly fall.
On Wednesday, GDP data showed the current account blew out to a record $12.9 billion deficit in the year to September.
In addition, consumer and business confidence data, released in the past week, showed confidence was at five-year lows.
BNZ currency strategist Sue Trinh said BNZ expects the weakening trend in kiwi to extend into 2006, "with risks firmly slanted in favour of a sub US60c outcome by the end of the coming year".
"The greatest challenges for the NZD over 2006 stem from lack of upside in nominal interest rates -- a concession to slowing domestic growth, which risks a hard landing.
"At the same time, this will see an accordant abatement in debt inflow via uridashi and eurokiwi issuance, which in turn will be (in our view) insufficient to cover the coming, very large, redemption schedule of existing issues."
Simultaneously, key commodity prices are expected to soften further and the ballooning current account deficit risked further damage to investor sentiment, she said.
The Australian dollar eased to US73.03c from US73.26c yesterday and the kiwi cross rate fell to A92.10c from A91.90c.
Rates:
4pm today 5pm Thursday
NZ dlr/US dlr US67.25 US67.34
NZ dlr/Aust dlr A92.10 A91.90
NZ dlr/euro 0.5662 0.5692
NZ dlr/yen 78.45 79.08
NZ dlr/stg 38.65 38.61
NZ TWI 69.46 69.66
Australian dollar US73.03 US73.26c
Euro/US dollar US1.1874 US1.1829
US dollar/yen 116.59 117.45
- NZPA
<EM>Currency:</EM> NZ dollar falls to five-month low
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