KEY POINTS:
The New Zealand dollar today opened below US76c for the first time in a month as investors continued to fret about plunging world equity markets and perceived risky assets such as the kiwi.
At 8am, today the kiwi was down to US75.75c against US76.20c at Friday's close. It
has fallen over 4 per cent in a week.
The kiwi also fell half a cent against the Australian dollar where it was down to a six-week low. By 8am, it was trading at A86.66c compared with A87.13c on Friday at 5pm. Against the US dollar, the Australian dollar was up to US87.74c from US87.44c at Friday's local close.
The local currency market has of late taken its lead from equity markets and Wall Street's performance on Friday suggests there will be no respite from that direction. US stocks fell half a per cent as investors expressed disappointment at President George W Bush's proposed US$150 billion ($200 billion) package of tax cuts and other measures to shore up the economy.
"The fear is that the plan, and even the Fed, may not have enough firepower to turn the path to recession around," said Richard Sparks, senior equities analyst at Schaeffer's Investment Research in Cincinnati.
The local share market index has fallen for 12 straight sessions, a record since the NZSX-50 Index began in 2000.
The kiwi was bobbing along around a two-month low against the yen, buying 81.18 at 8am against 81.57 on Friday at 5pm. The trade-weighted index was at 70.14 from 70.47 on Friday.
BNZ currency strategist Danica Hampton said global concerns were here to stay for a while longer, "and while the markets are hopeful that the Fed will cut (rates) aggressively at the next meeting, that probably won't change market sentiment".
The local market focus this week will be on the Reserve Bank's six-weekly reviews of interest rates. Almost no economists expect the bank to hike rates but the tone of governor Alan Bollard's statement is likely to be severe, particular as inflation data last week came in higher than forecasts of both the RB's and private sector economists.
Tight monetary policy here will contrast with easing policy in the US and Europe and that is likely to underpin the kiwi.
- NZPA