Kiwi dollar rebounds after nosedive
A report in NZ’s The Dominion Post says that the New Zealand dollar has rebounded strongly this morning after several days of falls.
After a nosedive which saw it lose US3 cents in panic selling yesterday, the kiwi began climbing again this morning to have gained US2 cents by around 9.30.
It had breached the US70 cent barrier and was trading at around US70.13 cents at around 10.30am.
However, that is still well down on the US81c level it briefly topped on July 24, and further falls could still be ahead with the ANZ Bank now predicting the dollar could fall below US60c.
Meanwhile, after opening weaker for the sixth consecutive session, the sharemarket recovered to be up 5.6 points to 3963 half an hour after opening.
Over a week the top 50 New Zealand shares (NZX50) have lost almost $2 billion in value and $4.6 billion since the market started to slide at the end of last month.
Investors have been hurt by the backwash from a growing international financial meltdown sparked by bad loans to high-risk borrowers in the US housing market.
The dollar’s fall over the past few days has already started affecting people’s wallets, with BP increasing petrol prices by 3c a litre.
Spokeswoman Diana Stretch said the dollar’s fall, combined with a rise in oil prices, had increased prices for 91 and 95 octane to $1.56.9 and $1.61.9 respectively. Diesel rose to $1.05.9.
Shell was last night resisting any similar urge but spokeswoman Jackie Maitland conceded “the dollar wasn’t helping”. Shell would review its position today.
The kiwi’s plunge yesterday saw a surprise statement from the Reserve Bank that it was ready to pump cash into the banking system if required.
Amid concerns that a global credit crunch could spread to New Zealand, Reserve Bank acting governor Grant Spencer reassured investors that banks had adequate liquidity and markets were functioning satisfactorily.
“The bank will continue to monitor conditions closely and stands ready to provide additional liquidity should that be necessary.”
The recent sudden drop in the dollar has put smiles back on the faces of sheep farmers hit hard by poor market returns and drought on the east coast.
But they say the dollar will have to stay down for the rest of the year to make a worthwhile difference. It will add cream to the cake for dairy farmers already enjoying record world prices.
Berl senior economist Ganesh Nana said ideally the dollar would come down even further for exporters, but at a slower pace than yesterday’s “steep, sudden and scary” fall.
But there was not a problem in the “real” world with the global economy still “growing and robust”. New Zealand job numbers were up and unemployment was down.
“There is no reason why New Zealand should suffer the consequences … in the US finance markets.”
Finance Minister Michael Cullen said on Tuesday that world markets were well placed to cope with the problem, and its seriousness had been exaggerated.
The crisis was helping to take the heat out of the dollar, he said.
Report by the Mole
John Alwyn-Jones
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