Dollar continues slump

Kiwi faces 'perfect storm' - strategist

The New Zealand dollar has continued its fall against the greenback, notching up a near-half cent fall after lunch.

The Kiwi was listing at around US69.63 cents at around 1.30pm, having clawed back some ground from a low of US69.52c but dropping from a midday high of US70.04c.

The Kiwi's fall has contrasted with a US currency which has been rising while the price of oil continues to fall.

The NZ dollar has fallen sharply from around US77.60c in mid-July.

While the Kiwi declined overall during the night it did spike up earlier in the session, getting up near US70.85c.

Stronger US dollar sentiment combined with a deteriorating domestic outlook has created a perfect storm for the New Zealand dollar, driving it down dramatically, says BNZ currency strategist Danica Hampton.

Hampton said a terrible domestic outlook, with continued woes in the housing market and rising fuel costs, had contributed to the Kiwi's decline.

Roger Kerr, director of Asia Pacific Risk Management, said the decline in the Kiwi from US80c cents down to the mid US70c range was largely due to domestic factors.

"The move from US74c-US75c to its current levels, however, is more about the greenback itself" Kerr said.

The greenback has rallied to a 6 month high against the Euro, boosted by falling commodities and oil prices and diminishing prospects of higher interest rates outside of the United States.

Hampton said the attractiveness of the greenback was supported by continued concerns over the global economy, and forthcoming second quarter Gross Domestic Product data from Japan and the Eurozone, which was expected to be negative.

Hampton expected the Bank of England, in its 2008-09 inflation report due tonight, to reduce its GDP forecast for the UK.

"The US dollar is the best of a bad bunch at the moment" Hampton added.

Kerr anticipates that if the greenback continues to make gains against the major currencies, the New Zealand dollar would "fall further into the mid to low US60c range".

Hampton concurred with Kerr's assessment.

"Ultimately the Kiwi is heading lower. How quickly depends on whether support for the greenback remains robust, and data on the domestic economy," she said.

Against the Australian dollar, the Kiwi continued to hold on to the gains of the last fortnight, listing at A79.29 at around 1.30pm after opening locally today at A79.14c.

The Kiwi was also buying 0.4677 euro from 0.4675 at yesterday's local close, while against the yen it slipped to 76.65 from 77.08. The trade weighted index was listing at around 64.65 at 1.30pm from 64.61.

The US dollar rallied to a 5½-month high against the euro, boosted by another drop in crude oil prices and speculation that the slowdown blighting the US economy was spreading worldwide.

Mounting signs of economic difficulties in Europe, Asia and Australia have diminished prospects of higher interest rates outside the United States, bolstering demand for the greenback.

- NZPA