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NZ Dollar Moves Below US51c, Avoids Scrape With Sheep Scrapie

Fuseworks Media
Fuseworks Media

Wellington, Feb 18 NZPA - The New Zealand dollar moved into a lower range overnight settling into a range just under the US51 cent mark.

At 8am today it was worth US50.89c after being worth US51.24c at 5pm yesterday. It reached a high of US51.22c and a low of US50.60c overnight after scaling close to US52c earlier in the week.

Heavy losses across global equities and risk aversion saw investors ditch growth sensitive currencies like the New Zealand dollar in favour of the relative safety of United States dollar last night, said BNZ currency strategist Danica Hampton.

Media reports suggesting atypical scrapie had been found in a flock of New Zealand sheep at British Research facility had the potential to spook currency markets.

However, this morning's media coverage offers a relatively sanguine view of the situation (suggesting its just old sheep and "probably not contagious") and there has been minimal impact on the NZD, Ms Hampton said.

Today the backdrop of risk aversion and soft global equities should continue to underpin the US dollar and ensure bounces in NZ/US dollar are limited.

"For today, we suspect bounces in NZD/USD will be limited to US51.50c. Solid support is expected around the US50.00-US50.20 region."

At 8am today, against the Australian dollar, the kiwi was up to A79.79 from A79.57 at 5pm yesterday.

Against the euro it was down to 0.4042 from 0.4053, against the Japanese yen it was down to 47.05 from 47.45 and against the British pound down to 35.72p from 36.07p.

In overseas foreign exchanges the US dollar gained broadly, rising to its highest in more than two months against the euro on Tuesday after warnings from two ratings agencies fuelled fears a sharp downturn in Eastern Europe would further pressure the euro zone banking sector.

The euro tumbled as concerns grew that a deep and prolonged recession in Eastern Europe would hit western European banks, which have significant exposure to the region.

"The credit market dysfunction that has certainly hurt the US economy is...a serious risk for Europe as well. That's pretty negative for the European economic outlook and certainly implies that the (European Central Bank) has more work to do," said Robert Blake, senior currency strategist at State Street Global Markets in Boston.

In midday trading in New York, the euro was down 1.6 percent against the dollar at $1.2570, according to Reuters data. It had earlier fallen to $1.2565, its weakest since December 4.

Investors remained averse to risk, pushing the yen higher against most currencies due to its safe-haven status. The currency, however, struggled versus the dollar after data showed Japan's economy shrank in the fourth quarter at the fastest pace in 35 years and the finance minister resigned.

The euro fell 0.8 percent to 116.22 yen, while the dollar edged up 0.8 percent to 92.42 yen, having earlier risen to a one-month peak at 92.75.

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