The New Zealand dollar lost about a cent in the last 24 hours after business confidence weakened and the government bailed out significant lender South Canterbury Finance (SCF).Yesterday afternoon's National Bank Business Outlook reported another sharp fa
The New Zealand dollar lost about a cent in the last 24 hours after business confidence weakened and the government bailed out significant lender South Canterbury Finance (SCF).
Yesterday afternoon's National Bank Business Outlook reported another sharp fall in business confidence, with a 12-point decline in the number of businesses surveyed who expected general business conditions to improve in 12 months' time, compared with the July survey.
Today, SCF called in the receivers and the government handed over $1.6 billion to pay out 35,000 investors under the Retail Deposit Guarantee Scheme, and a $175 million loan.
The government expects to claw back most of the $1.6 billion – the equivalent of 0.8∞ of gross domestic product – as the company is wound up, leaving the taxpayer with a shortfall of about $600 million to be met from the guarantee scheme.
Standard & Poor's said New Zealand's credit ratings were not immediately affected by the bailout, as the government had already provided for the net cost.
However, the kiwi took a small dive after the news. Figures showing building consent figures continued to bump along at a low rate in June provided no relief.
By 5pm, the kiwi had dropped to 70.30USc from 71.05USc at 5pm yesterday, but recovered a touch from the day's low of 70.09USc.
The kiwi also weakened against the Australian dollar, to 78.55Ac from 79.05Ac late yesterday afternoon, and was softer across the board.
It was at €0.5550 from €0.5579 yesterday, at ¥59.21 from ¥60.66, and 45.55p from 45.76p.
The trade weighted index was accordingly lower, at 65.80 from 66.45.
Overnight, trade had been relatively lacklustre, with British markets closed for a holiday. Driving trade today, the yen was near a 15-year high against the US dollar after the Bank of Japan's decision to expand cheap loans to banks disappointed investors who had looked for more aggressive measures to curb the yen's strength.
The low-yielding yen was likely to remain in favour as investors, concerned about continued US economic worries, turn away from higher risk assets.
