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NZ dollar drops ahead of Spain bank moves

Wednesday 29 Aug 2012 9:47a.m.

NZ dollar drops ahead of Spain bank moves

The New Zealand dollar fell to a two and a half month low against the euro after European Union president Herman Van Rompuy said the region's rescue fund is ready to bail out Spanish banks.

The New Zealand dollar fell to 63.99 euro cents at 8am, the lowest since July 6, from 64.66 cents on Tuesday.

The kiwi declined to 80.45 US cents from 80.71 cents and the trade weighted index decreased to 72.21 from 72.64.

The euro advanced against the kiwi after Mr Van Rompuy said the region's rescue fund is ready to act and Spain sold more government bills than its maximum target at an auction.

European Central Bank president Mario Draghi also cancelled his trip to the annual central bank summit in Jackson Hole, Wyoming, where he was scheduled to deliver a speech on Saturday.

"The kiwi has probably done its moves on the downside [against the euro] - we will be looking to consolidate," said Stuart Ive, currency strategist at HiFX.

"It's all hands to the pump in terms of anyone at the ECB."

Markets are waiting for the Jackson Hole symposium which kicks off on Friday, when investors will be looking for guidance on stimulus measures from Federal Reserve chairman Ben Bernanke.

Mr Ive said the kiwi has also "corrected dramatically" against major currencies after local dairy exporter Fonterra cut its 2013 forecast payout to farmers, citing falling commodity prices and a strong currency.

The New Zealand dollar fell to 77.49 Australian cents from 77.92 cents on Tuesday and to 63.15 yen from 63.37 yen.

NZN

 
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