Bloomberg News

N.Z. Dollar Slumps to 6-Month Low After Fitch, S&P Rating Cuts

September 30, 2011

Sept. 30 (Bloomberg) -- New Zealand’s currency fell to its lowest level in six months against the dollar after Standard & Poor’s joined Fitch Ratings in cutting the country’s credit rating, adding to concern borrowing costs will increase.

The kiwi weakened versus most of its 16 major peers this week as a survey showed business confidence fell in September. The Australian dollar slid against the greenback for a fourth straight week after a private report indicated a contraction of Chinese manufacturing. The Aussie reached a three-week high against its New Zealand counterpart.

“The global outlook is far from looking positive,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second-largest lender. “While that remains the backdrop, commodity currencies like the Aussie and the kiwi will probably underperform.”

New Zealand’s currency fell to as low as 76.08 U.S. cents, its weakest level since April 1, before trading at 76.74 U.S. cents as of 11:28 a.m. in New York from 77.10 cents yesterday. It dropped to 59.15 yen from 59.24 yen. The Australian dollar fetched 97.44 U.S. cents from 97.82 cents and bought 75.14 yen from 75.16 yen. The Aussie climbed as high as NZ$1.2777, its strongest level since Sept. 8, before trading at NZ$1.2706 from NZ$1.2687 yesterday.

The kiwi dropped 1.3 percent drop against the dollar this week. It’s down 10.1 percent this month and down 7.5 percent during the quarter. The Australian dollar has lost 8.8 percent since Aug. 31 and has declined 9.1 percent during the past three months.

Rating Cuts

New Zealand’s sovereign credit rating was cut one step to AA by Fitch, which cited the southern Pacific nation’s high level of external debt and its persistent current account deficit. The outlook is stable after the rating was reduced from AA+, Fitch said yesterday in a statement.

The country had its long-term local-currency rating cut to AA+ from AAA and its long-term foreign-currency rating reduced to AA from AA+ by S&P, which has a stable outlook on the rankings.

The Australian dollar weakened against its Japanese counterpart after a purchasing managers’ index for China showed the longest contraction in two years.

The reading of 49.9 was unchanged from August and compared with a preliminary 49.4 figure published last week, according to the gauge released today by HSBC Holdings Plc and Markit Economics. It was the third month the reading was below the 50 level that separates expansion from contraction. China is Australia’s largest trading partner and New Zealand’s second- biggest export market.

--With assistance from Catarina Saraiva in New York. Editors: Paul Cox, Dave Liedtka

To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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