NZ dollar falls to 4.5-month low on talk of Greek euro exit
The kiwi falls to a new low amid expectations Greece will quit the euro zone after failing to elect a government.
BUSINESSDESK: The New Zealand dollar fell to a 4.5-month low amid expectations Greece will quit the euro zone after failing to elect a government, leading to prolonged instability in financial markets and less demand for riskier assets.
The kiwi fell tumbled to 76.48 US cents in local trading, the lowest since December 29.
It traded at 76.54 US cents at 5pm, down from 76.82 cents at 8am and 77.76 cents yesterday.
The trade-weighted index in declined to 69.47 from 70.17 yesterday.
Investors spurned risk-sensitive assets after Greek President Karolos Papoulias failed to cobble together a coalition that would let the Mediterranean nation draw down on regional bailout funds and avoid another general election.
With Greece set to go back to the polls, markets are pricing in a Greek exit from the euro zone as more likely than not, leaving the region vulnerable to greater upheaval.
"There's potential for this bout of risk aversion to be nastier than the one around the middle of last year, as there's more credence behind a euro zone exit," said Imre Speizer, market strategist at Westpac Banking.
"The US dollar has got the potential to go a long long way", which would push the kiwi down, he said.
Demand for the kiwi was sapped by a weak auction on Fonterra's online trading platform as the trade-weighted dairy price sank 6.4% near a three-year low.
Westpac economists cut their expected forecast pay-out to $5.50 per kilogram of milk solid before the weak auction, and Mr Speizer said that leaves the final payment vulnerable to "downside risks".
The kiwi fell to 60.21 euro cents from 60.62 cents yesterday, and declined to 47.94 pence from 48.33 pence.
It dropped to 77.23 Australian cents from 77.92 cents yesterday, and dropped to 60.21 yen from 62.11 yen.
Paul McBeth
Wed, 16 May 2012
Wed, 16 May 2012
© All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.
NZ dollar falls to 4.5-month low on talk of Greek euro exit
20761