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NZ Dollar Falls On Concerns About Funding Current Acct Deficits

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, March 31 NZPA - The New Zealand dollar lost a cent against the greenback amid fears the global credit crunch will make the funding of current account deficits difficult.

The kiwi fell from US80.60c around midnight Friday to about US79.40c seven hours later, and at 8am today was buying US79.59c.

The fall in the kiwi came even as the US dollar was down against the yen, with investors worried that the credit crisis which has fractured the US financial sector was far from over, pushing stocks lower.

A drop in US shares and concerns that the credit crunch would make the funding of current account deficits difficult took some edge off the British pound and the New Zealand and Australian dollars.

"It's very difficult, even when equities begin to rally, for investors to sell the yen aggressively, considering that at any time you could have (US) banks come out with massive losses," said Mark Meadows, a currency analyst at Tempus Consulting in Washington.

Figures out last Thursday show this country's current account deficit for the year to December was $13.8 billion, equating to 7.9 percent of Gross Domestic Product.

That is the lowest ratio since June 2005, but analysts say a deficit of over 5 percent of GDP should have alarm bells ringing for foreign investors.

Against the Australian dollar the kiwi dropped below A86.60c to its lowest level in 10 days. By 8am today it was buying A86.81c.

The NZ dollar fell to a four-month low against the euro around 0.5030 on Saturday morning. By 8am today it was at 0.5037 euro.

At today's local open the kiwi was also buying 79 yen, down from 80.14 yen at 5pm on Friday. The trade weighted index was 70.59 from 71.31.

NZPA WGT Reuters mjd nb

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