Kiwi falls after global growth forecasts cut
BUSINESSDESK: The New Zealand dollar followed equity markets lower after the International Monetary Fund cut its forecast for global growth, snapping demand for risk-sensitive currencies such as the kiwi.
The kiwi fell to 81.84 US cents at 8am in Wellington from 82.27 cents at 5pm yesterday. The trade weighted index decreased to 73.16 from 73.38 yesterday.
The IMF sounded an alarm over the global economic slowdown, cutting its 2012 and 2013 growth forecasts. The global economy will expand 3.3% this year and 3.6% in 2013, it said in its World Economic Outlook. That is down from its July forecast of 3.5% for 2012 and 3.9% in 2013.
Equity markets fell on both sides of the Atlantic. Wall Street's Standard and Poor's 500 Index shed 0.7%, while the Dow Jones Industrial Average dropped 0.6%. France's CAC 40 declined 0.7%.
"The global forecasts are probably correct and there is safe-haven buying on the back of it" helping push the New Zealand dollar lower, says Tim Kelleher, head of intuitional FX sales NZ at ASB Institutional.
The kiwi is likely to trade in a range between 81.50 US cents to 82 cents on the day as "off shore investors place more emphasis on it than the local market".
The New Zealand dollar rose to 63.51 euro cents from 63.35 cents as a meeting between German Chancellor Angela Merkel and Greek Prime Minister Antonis Samaras failed to reassure investors that an agreement has been reached regarding the next tranche of Greece's bailout.
Ms Merkel's visit came as the IMF forecasts predict Greece will miss the five-year debt reduction goal that underpins the nation's bailout.
Ministers from the wider European Union meet tomorrow.
There is no significant New Zealand set for release today. The accommodation survey for August will be release tomorrow, as well as the food price index for September from Statistics New Zealand.
That is followed by the ANZ-Roy Morgan Consumer Confidence and Bank of New Zealand performance manufacturing index set for release tomorrow afternoon.
The kiwi fell to 80.10 Australian cents from 80.34 cents and decreased to 64 yen from 64.46 yen. It rose to 51.11 British pence from 50.74 pence.