KEY POINTS:
The New Zealand dollar tumbled to a one-month low today as investors were caught out by surprisingly bad business confidence and a warning from Standard & Poor's.
By 5pm, the kiwi was at US56.13c, down from US58.58c late yesterday afternoon. Against the Australian dollar, the kiwi fell to A83.07c from A84.50c.
The kiwi was also lower against the euro, yen and sterling, pushing it to 55.57 on the trade weighted index from 57.57 late yesterday.
While there was no hope for a rosy outlook from the New Zealand Institute of Economic Research's (NZIER) quarterly survey of business opinion, in the end it was a terrible result, HSBC senior manager Daniel Brdanovic said.
Business confidence fell to levels last seen in the 1970s, and most believed the worst was to come.
A net 44 per cent of firms reported lower activity for the December quarter, and a similar amount expected trading activity to fall further next quarter.
A net 77 per cent, seasonally adjusted, expected the general business situation to deteriorate in the next six months.
"If those are business expectations going forward, well, it's not very positive for the economy," Mr Brdanovic said.
On top of that, S&P downgraded the outlook on New Zealand's foreign currency-denominated debt to negative from stable as the country's position worsened.
The future of the foreign currency rating hinged on what the Government offered in its next budget, in May.
S&P's affirmed its AA+ foreign currency and AAA local currency long-term ratings on New Zealand, and maintained its stable outlook on the local currency rating.
The kiwi's range was US58.05c at the start of the session to its low of US56.13c at the end.
"The US dollar has shown some strength across the board, but kiwi's been doing its own thing," Mr Brdanovic said.
"It definitely was a surprise. I think some of this data was due and maybe the market hadn't been pricing it in, or hadn't been focusing on the New Zealand outlook, but we're definitely up there now."
The euro fell against the US dollar, under pressure near yesterday's one-month low as expectations mounted for a European Central Bank interest rate cut this week.
The euro's fall against the dollar was also partly due to US dollar gains against the kiwi in the wake of S&P's warning.
Currency rates:
NZ dlr/US dlr US56.13c US58.58c
NZ dlr/Aust dlr A83.07c A84.50c
NZ dlr/euro 0.4211 0.4375
NZ dlr/yen 50.21 52.75
NZ dlr/stg 38.02p 38.78p
NZ TWI 55.57 57.57
Aust dlr/US dlr US67.58c US69.32c
Euro/US dlr 1.3326 1.3387
US dlr/yen 89.43 90.06
- NZPA
