Wellington, July 16 NZPA - The New Zealand dollar was knocked lower by news that credit rating company Fitch has changed the outlook for the country's credit rating to negative from stable.
While Fitch is not as powerful as Moody's Investors Service or Standard and Poor's it reminded traders of the country's high debt levels and reliance on borrowing from offshore.
The NZ dollar fell from US64.63c to US63.90c at 5pm. It was US64.07c at 5pm yesterday and opened this morning at US65c when equity markets around the globe posted gains.
Sentiment held through the reports of the 7.8 earthquake in New Zealand on Wednesday night as it was in a remote region and little damage resulted.
The Fitch announcement about the changed outlook for the country's credit rating came out of the blue, though the ratings agency was known to have visited the country.
"It is a knee-jerk reaction. Fitch came to New Zealand about a month ago and did the rounds," Imre Speizer, Westpac's senior market strategist, said.
It had identified a risk that property market speculators could return and create another housing market bubble funded with offshore borrowings, he said.
"That worsens the current account. That's the thinking and they are just flagging it," he said. "I suspect they are flagging it because they have seen signs of the housing market bottoming out and picking up again," he said.
The NZ dollar had gained to A80.94c at 8am from A80.65c at 5pm yesterday but retreated to A80.10c by 5pm today.
It was at 0.4545 euro from 0.4578 yesterday and 59.97 yen from 59.89 yen yesterday.
The trade weighted index rose to 60.21 from 60.49 yesterday.
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