Kiwi at two-month euro low Draghi stokes ECB action talk
BUSINESSDESK: The New Zealand dollar fell to its lowest against the euro since late June after European Central Bank chief Mario Draghi gave more details of his bond-buying plans, stoking expectations the ECB will take action this week.
The kiwi dollar traded at 63.32 euro cents from 63.69 cents at 5pm in Wellington yesterday. The local currency fell to 79.70 US cents from 80.14 cents with little direction provided by US markets closed for the Labor Day holiday.
Mr Draghi reportedly said he favours buying bonds maturing in up to three years, a sign he is more determined to press on with a programme opposed by Germany's Bundesbank.
Investors are weighing the prospects for him to announce the bond-buying programme to help keep a lid on the region's borrowing costs on Thursday after a meeting of policymakers.
Mr Draghi's comments "raise the expectation there might table something in Europe", says Imre Speizer, market strategist at Westpac Banking Corp. The euro "has been swinging back and forth on expectations of the ECB delivering or disappointing".
"I think they will under-deliver," he says.
Traders are today looking ahead to the Reserve Bank of Australia's policy review, which may highlight the central bank's concerns about a persistently high Australian dollar, especially given prices of the nation's raw materials such as iron ore have tumbled.
The kiwi fell to 77.80 Australian cents from 77.98 cents.
While the RBA is universally expected to keeps its benchmark interest rate unchanged at 3.5% today, comments from governor Glenn Stevens about concern about the high Australian dollar "raises the spectre that easing remains on the table", Mr Speizer says.
That would likely weigh on the Australian and the New Zealand dollars.
The trade-weighted index fell to 71.71 from 72.05 late yesterday. The kiwi fell to 62.39 Japanese yen from 62.74 yen and slipped to 50.17 British pence from 50.48 pence.