$NZ holds out; $Aust struggles
PA Wellington
The New Zealand dollar was held back yesterday by an Australian currency struggling to recover from some bad news on the financial front, but still managed to finish 18 points up for the day.
The kiwi had been well bid, and the Australian dollar’s fall did not pull it too far, a dealer said.
By close the kiwi was back up to U558.93/59.03 from its opening at 58.75/85. It hit a high of U559.05c yesterday, after closing at 58.75/85 on Monday. In the wake of the Australian dollar’s fall, the kiwi hit a low of U558.65C. “It’s devaluation by association,” a Wellington dealer said. "The Aussie is having problems, so the kiwi suffers too, though it’s not like a few years ago where we used just follow in the footsteps of the Australian currency. ”
The Australian dollar did recover slightly in local trading after dropping sharply in reaction to a Moody’s Investors Service downgrading of Australia’s sovereign debt rating to AA-2.
The Aussie unit closed here at U575.75/82C after the knee-jerk reaction of traders drove it down from 76.03/10 to 75.60/70, within minutes of the 9.08 a.m. announcement from the United States-based ratings agency. In spite of overnight speculation about the rating, the Aussie had opened at 75.87/94, the same levels at which it closed here on Monday.
“The problem is some dealers anticipated the downgrading, and others didn’t,” a dealer said. "There's been a bit of knee-jerk reaction from traders, and now we have to wait and see what the overseas investors think.”
“Many of them have catered for the possibility already, but some may still
want to switch investments from Australia to New Zealand.”
Dealers said the test of support for both the kiwi and the Aussie would come overrnight as the European and United States markets were able to assess whether the new rating implied enough risk to make it worth changing their weightings in the market or moving out of it.
On the cross-rate against the Australian dollar, the kiwi firmed, closing at Aust77.B3c from 77.47 at Monday’s close. It opened yesterday at 77.35. On other crosses, the New Zealand dollar fell slightly against ail main currencies, to 1.1536 Deutsche marks; 37.49 p; 85.07 yen; and 0.9938 Swiss francs.
At close the trade-weighted index was back at 61.8, where it opened for the day, up on its close on Monday of 61.6. One week ago It was 61.6, and a month ago it was 60.1. In Sydney yesterday short covering saw the Australian dollar regain the half a United States cent it lost earlier after news of the downgrading of Australia’s credit rating. The Australian unit finished almost steady at U576.03/10C compared with Monday's close at 76.01/08.
It firmed to $NZ1.2872/ 2902 from $NZ1.2866/99. In New York on Monday (local time) the United States dollar ended higher but was tethered to a narrow trading range.
Dealers said its upside was limited by position-squaring ahead of today's release of GNP. The greenback ended at 1.9630/40 Deutshe marks from 1.9620/30. It finished at 144.53/60 yen, up from 143.85/95 yen on Friday, its fortunes against the yen at least partially bolstered by the continued uncertainty about the new Japanese Government.
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Press, 30 August 1989, Page 38
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538$NZ holds out; $Aust struggles Press, 30 August 1989, Page 38
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