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Kiwi falls with Aussie on China downgrade

NZ Newswire logoNZ Newswire 26/05/2017

NZ dollar gains rate cut prospect eases © Mark Tantrum/Getty Images NZ dollar gains rate cut prospect eases The New Zealand dollar fell along with the Australian dollar on Friday after officials at Moody's Investors Service said China could face another credit rating downgrade if it doesn't contain its debt mountain.

Both currencies were also hurt by falling commodity prices.

The kiwi declined to US70.14c as at 5pm in Wellington from 70.41c late Thursday and is up about 1.3 per cent from a week ago.

Moody's official Li Xiujun said in a webcast that China may not be able to hold onto its A1 credit rating if the nation's debt grows at a faster pace than the ratings agency anticipates.

The webcast follows Moody's decision this week to cut China's rating to A1 from Aa3, earning a rebuke from the world's second-largest economy, with the finance ministry describing Moody's as "sloppy" and its move based on inappropriate methodology.

The Australian dollar fell more than the kiwi on the news, on the basis that it is more exposed to changes in China's fortunes and demand for its iron ore and coking coal.

"The Australian dollar is leading the charge but we're somewhat linked to the Chinese economy as well," said Mitchell McIntyre, a dealer at HiFX.

"Combine that with the fact that commodities were hit overnight - oil and then iron ore - and commodity currencies have been dragged down."

The kiwi rose to A94.39c from 93.84c and fell to 4.8060 yuan from 4.8373 yuan.

The kiwi was little changed at 62.60 euro cents and rose to 54.40 British pence from 54.21 pence. The local currency fell to 78.23 yen from 78.56 yen.

New Zealand's two-year swap rate decreased 1 basis point to 2.21 per cent and 10-year swaps fell 4 basis points to 3.19 per cent.

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