Bloomberg News

New Zealand, Aussie Dollars Fall to Lowest in a Month After Fed

September 21, 2011

Sept. 21 (Bloomberg) -- The New Zealand and Australian dollars fell to the lowest levels in more than a month versus their U.S. counterpart as stocks and commodities slid after the Federal Reserve said there are “significant downside risks” to the economic outlook.

New Zealand’s currency, nicknamed the kiwi, dropped earlier after the nation posted a current-account deficit that was wider than economists forecast. The Aussie fell earlier as stocks retreated after European officials said they plan to return to Athens next week after three days of consultations failed to produced a solution to the country’s debt crisis.

“That the Fed sees more risks to the downside is putting a lot of pressure on risk,” said Charles St-Arnaud, a foreign- exchange strategist at Nomura Holdings Inc. in New York. “We are seeing commodity currencies depreciate quite sharply after the announcement, with the Australian and New Zealand dollar losing quite dramatically.”

New Zealand’s currency plunged 2.8 percent to 80.13 U.S. cents at 3:50 p.m. in New York, from 82.42 cents yesterday. The kiwi touched 80.05 cents, the lowest level since Aug. 9. It tumbled 2.5 percent to 61.44 yen, from 63.

The Aussie slid 1.9 percent to $1.0084, from $1.0276, and touched $1.0062, also the weakest since Aug. 9. The currency dropped 1.7 percent to 77.22 yen, from 78.57.

The Standard & Poor’s 500 Index dropped 3 percent, and the Thomson Reuters/Jefferies CRB Index of raw materials fell 1.1 percent.

Fed Plan

The U.S. central bank will buy $400 billion of bonds with maturities of six to 30 years through June while selling an equal amount of debt maturing in three years or less, the Federal Open Market Committee said today in Washington after a two-day meeting. The action “should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative,” the FOMC said.

New Zealand’s current-account deficit was NZ$921 million ($757 million) in the second quarter, Statistics New Zealand said today. The median estimate in a Bloomberg News survey of economists was for a shortfall of NZ$671 million.

The nation’s gross domestic product rose 0.5 percent in the three months through June from the prior quarter, according to the median of 15 estimates in a Bloomberg News survey before a government report tomorrow at 10:45 a.m. in Wellington. The economy grew 0.8 percent in the first quarter.

Reserve Bank of New Zealand Governor Alan Bollard said the central bank is in no rush to raise interest rates even as Europe’s sovereign debt crisis and a U.S. slowdown are having a minimal impact on economic growth. He spoke at a Euromoney conference in New York.

--With assistance from Mariko Ishikawa in Tokyo and Masaki Kondo in Singapore. Editors: Greg Storey, Dave Liedtka

To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Allison Bennett in New York at abennett23@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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