The New Zealand dollar held below 83 US cents in local trading as the uncertain election outcome in Italy dented investors' appetite for riskier or higher-yielding assets and trumped an unchanged outlook for this season's payout to dairy farmers.
The kiwi traded at 82.43 US cents at 5pm in Wellington from 82.54 cents at 8am, down from 83.39 cents yesterday. The trade-weighted index fell to 75.49 from 76.28 yesterday.
The prospect of a stalemate after Italy's first general election since the global financial crisis has spooked investors, reigniting fears Europe's fourth biggest economy will not continue a drive for austerity, and that will seep into rest of the region.
Election results in Italy showed Pier Luigi Bersani, who supports the cost-cutting programme, won the lower house by less than half a percentage point, while former prime minister Silvio Berlusconi secured a blocking vote in the Senate.
"That's going to hang over market sentiment as people fret about whether Italy can potentially be stable or if it's a big risk to Europe," says Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney. "It's not going to have a direct impact on the New Zealand dollar, but more through the confidence channel."
The downbeat tone overshadowed Fonterra affirming an expected farm-gate payment of $5.50 per kilogram of milk solids, and government figures showing a slightly bigger trade deficit than predicted last month.
The Fonterra announcement and trade figures "were a bit of a yawnfest, with the focus still on Italy", Mr Tennent-Brown says.
Northern Hemisphere investors will continue to look for any clues on whether Italy can make its election result work, or if it will call another election, and watch the second day of testimony by Federal Reserve chairman Ben Bernanke to policymakers in the US.
The kiwi fell to 63.10 euro cents from 63.84 cents yesterday and declined to 54.56 British pence from 54.78 pence. It dropped to 80.62 Australian cents from 81.16 cents and fell to 75.75 yen from 76.83 yen.
This article is tagged with the following keywords. Find out more about MyNBR Tags
- LinkedIn too slow, too vague after hackers put logons up for sale – and you could still be at risk
- Briefcase: Litigation funders and the 23-year-old class action lawyer, the lawyer who embraces social media
- BUDGET 2016: Landbankers choking Auckland's housing supply
- Political week: Political groundwork rather than 'whizz bangs' the hallmark of Budget 2016
- The Budget in 60 seconds: 10 key points
Most listened to
- Budgets are not branches of the entertainment industry says NBR's Rob Hosking
- “In those big markets we’re more of a disrupter” – Don Braid on Mainfreight’s global growth path
- Grant Thornton partner Greg Thompson says the walls of secrecy in the tax system are starting to erode
- Why has the construction industry got it good? Metro Performance Glass's CEO Nigel Rigby explains
- Landbankers choking Auckland's housing supply. JLL capital markets director Justin Kean discusses what can be done