Kiwi slips as German confidence dims, IMF growth warning
BUSINESSDESK: The New Zealand dollar declined after Germany business confidence weakened and the International Monetary Fund flagged a possible downgrade in its forecast for global economic growth.
The New Zealand dollar fell to 82.16 US cents from 82.39 cents at 5pm in Wellington yesterday. The trade-weighted index fell to 72.96 from 73.09.
Germany’s Ifo institute said its business climate index fell to 101.4 in September from 102.3 in August, against economist expectations of an increase. The results helped undermine risk appetite and demand for growth-linked assets including the kiwi dollar.
Meantime, IMF chief Christine Lagarde hinted that the fund might soon lower its estimates for global economic growth. Weaker global demand is being reflected in prices for New Zealand exports including coal, with state-owned miner Solid Energy shuttering mines and eliminating jobs.
“The market appears to be reassessing its recent love affair with risk,” says Kymberly Martin, a strategist at Bank of New Zealand. The key level of 82 US cents “will likely be re-tested today”.
No government economic data is scheduled today, though Finance Minister Bill English is to speak to the Public Service Association this morning.
The New Zealand economy grew twice as fast as economists had expected in the second quarter, figures last week showed, though growth was fuelled by record milk production that will not be repeated this season.
Fonterra, the world’s largest exporter of dairy products and New Zealand’s biggest company, is scheduled to release its full-year results tomorrow and may update its view of the outlook for global prices and farm production.
The kiwi traded at 50.72 British pence from 50.77 pence yesterday and was at 63.57 euro cents from 50.77 cents. It fell to 63.98 yen from 64.16 yen and fell to 78.83 Australian cents from 78.91 cents.