Kiwi drops as weak US earnings add to ‘risk off’ sentiment
BUSINESSDESK: The New Zealand dollar fell as weak US earnings weighed on equities and added to a risk off tone in currency markets.
The kiwi fell to 81.15 US cents from 81.65 cents at 5pm in Wellington yesterday and the trade-weighted index fell to 72.6 from 72.82.
Shares of DuPont, Xerox and 3M weakened as earnings disappointed. The Dow Jones Industrial Average fell 1.7%.
In Europe, Spain's economy shrank for a fifth consecutive quarter and Moody's Investors Service cut the credit rating on five Spanish regions, adding to doubts about the sustainability of global growth and growth-linked assets including the kiwi dollar and commodity prices.
"It's a continuation of some very poor earnings from some large US companies," says Tim Kelleher, head of institutional FX sales NZ at ASB Institutional. That has added to the "risk-off" sentiment.
In the US, the Federal Reserve has begun its two-day policy meeting and the New York Times reported that central bank chief Ben Bernanke has told close friends he probably will not seek a third term even if US President Barack Obama wins a second term in the November 6 election.
The kiwi traded at 62.50 euro cents from 62.55 cents and fell to 50.86 British pence from 50.99 pence. It slipped to 79.06 Australian cents from 79.13 cents and fell to 64.79 yen from 65.19 yen.