Kiwi falls as weak US data, rumours of Spanish downgrade

(BusinessDesk) The New Zealand dollar fell after weak US data and speculation Spain's credit rating may be cut to junk eroded investor appetite for higher-yielding, riskier assets.

The kiwi slipped to 82.82 US cents at 8.30am from 82.97 cents on Friday in New York and was little changed at 73.81 on a trade-weighted basis from 73.91 last week.

Wall Street's Standard & Poor's 500 Index fell 0.5% on Friday after the Chicago PMI showed shrinking activity last month and weaker-than-expected consumer confidence. Sentiment was dimmed by speculation Moody's Investors Service may cut Spain's government debt to junk.

The yield on Spain's benchmark 10-year government bond fell 1.3 basis points to 5.949%. Investors were expecting Spain would seek a formal bailout for its ailing banking system ahead of stress testing last weekend, which showed the nation's lenders have a capital deficit of 59.3 billion euros.

"US data disappointed, and the fact Spain hasn't asked for a bailout and the rumours of a Spanish downgrade were all negatives," says Imre Speizer, market strategist at Westpac Banking in Auckland. "The kiwi hasn't opened with any conviction" and will probably stay in recent trading ranges.

Mr Speizer says the currency may trade between 82.35 US cents and 83.40 cents today.

It may extend its rally against its trans-Tasman counterpart, having touched 80.17 Australian cents in today's session, the first time it has broken above 80 cents in more than a year. Australian markets are closed for the Labour Day holiday ahead of tomorrow's central bank meeting.

Markets are undecided on whether the Reserve Bank of Australia will cut its 3.5% target cash rate.
The kiwi recently traded at 79.83 Australian cents from 79.88 cents last week.

It was little changed at 64.60 yen from 64.58 yen last week, and traded at 64.45 euro cents from 64.47 cents. It was almost unchanged at 51.28 British pence from 51.27 pence.