What will the dollar do?

Experts are saying the New Zealand stock exchange will not be taking a hammering when it opens tomorrow morning despite new shockwaves after the United States was given its first credit ratings downgrade in dozens of years yesterday.

Standard & Poor's down-graded the US Government's credit rating to AA+ from triple A. It came after a week of wrangling over America's debt levels, which sparked a run of panic selling on sharemarkets around the world, including wiping more than a billion dollars from the New Zealand sharemarket on Friday.

News out of the US was not all black yesterday, with the number of unemployed down - a rare boost for President Barack Obama. That, and the fact New Zealand was one of the less significant sharemarkets, had given hope the NZX would not immediately dip.

New Zealand Shareholders' Association chairman John Hawkins said: "It will have a sobering effect on markets until they can absorb the news and decide what impact it will have.

"We're one of the earliest sharemarkets to open but we take our lead on what happens on the other side of the world."

It was unlikely there would be major movement until bigger markets such as Singapore and Sydney opened.

Craigs Investment Partners head of private wealth research Mark Lister said trading would be weak, but "in a real sense we look pretty good". He said New Zealand's economy was well placed with a stable government and good exports.

BNZ chief economist Tony Alexander said it was a guess what the latest moves in the US would do to the dollar, but "if the markets crash, that would argue strongly against... raising interest rates."

Finance Minister Bill English said New Zealand was better placed than many countries and, with our debt staying below 30 per cent of GDP, there was no need to panic.

"Businesses and households have lifted their savings - reducing their reliance on debt - and our banks are better capitalised and have more stable funding positions following regulatory changes."

Labour's finance spokesman, David Cunliffe, however, said the US's problems could hit the cost of credit here.

The most scary prediction came from investment adviser Gareth Morgan, who said the US economy was "essentially moribund".

"They were totally rooted when house prices were annihilated and need creditors to forgive them," he said.

"If you take away the sweet spots, we don't look as attractive as we did. It's going to be quite tough - we're looking at some hard yards".