Bloomberg News

N.Z. Dollar Snaps Gains as Deficit Widens, Euro Concern Lingers

December 20, 2011

Dec. 21 (Bloomberg) -- The New Zealand dollar snapped gains from yesterday after a report showed the country’s current- account deficit widened by more than economists had forecast.

The Australian dollar fell against the yen amid lingering concern Europe’s debt crisis will weigh on global growth. Both South Pacific nations’ currencies rallied yesterday as commodities prices and stocks around the world rose.

“We had a negative piece of data in the form of a larger- than-expected third-quarter current-account deficit, and that’s taken a little bit of wind out of the kiwi dollar’s sails,” said Mike Burrowes, a currency strategist at Bank of New Zealand Ltd. in Wellington. “There’s no doubt that all the risks to global outlook and perhaps domestic outlook in New Zealand and Australia are still firmly in Europe so for traders, it’s going to be an ongoing process of keeping one’s eye on the European headline.”

New Zealand’s dollar was little changed at 76.76 U.S. cents as of 9:47 a.m. in Sydney from 76.79 in New York yesterday, when it jumped 1.6 percent. The kiwi fell 0.1 percent to 59.75 yen from 59.81 yesterday when it gained 1.4 percent.

The Australian dollar slid 0.1 percent to $1.0067 after rallying 1.9 percent yesterday. The currency fell 0.2 percent to 78.34 yen.

The MSCI World Index of stocks rose 2.5 percent yesterday while the Thomson Reuters/Jefferies CRB Index of raw materials gained 2 percent.

N.Z. Deficit

New Zealand’s current-account deficit was 4.3 percent of gross domestic product in the year ended Sept. 30, from 3.7 percent in the 12 months through June, Statistics New Zealand said in Wellington today. Economists predicted a 3.9 percent gap, according to the median of 11 forecasts in a Bloomberg News survey.

“New Zealand’s external position is certainly not as dire as some countries, however, these numbers were a genuine negative surprise,” said Bank of New Zealand’s Burrowes.

Moody’s Investors Service said yesterday the U.K.’s Aaa rating depends on the government sticking to its fiscal plan and that the economy is not immune to the turmoil in the euro area. Fitch Ratings, which lowered its outlook on France to “negative” on Dec. 16, said yesterday the euro area’s rescue fund may lose its top credit status were France’s AAA grade to be cut.

-- Editors: Rocky Swift, Garfield Reynolds

To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

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


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