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NZ dollar slips on China downgrade

NZ Newswire logoNZ Newswire 24/05/2017

<p>NZ Dollar</p> © Bloomberg

NZ Dollar

The New Zealand dollar dipped below US70c as credit rating agency Moody's Investors Service downgraded China's rating on fears rising debt levels could stifle growth in the world's second-biggest economy.

China is New Zealand's and Australia's biggest trading partner.

The kiwi traded at US69.94c at 5pm in Wellington, having touched a month-high 70.46c overnight, and down from 70.19c on Tuesday.

Moody's lowered China's long-term local currency rating one notch to A1 and downgraded the outlook to 'negative' from 'stable'.

This was on concerns the nation's financial strength would "erode somewhat over the coming years with the economy-wide debt continuing to rise as potential growth slows".

That weighed more heavily on the Australian dollar than on the kiwi.

"The big news of today was that China downgrade", which "caused a little bit of volatility," said Michael Johnston, senior trader at HiFX in Auckland.

"We suffered a little bit on the back of it but certainly, the Australian dollar suffered more."

The kiwi rose to A93.92c from 93.60c Tuesday and fell to 4.8196 Chinese yuan from 4.8346 yuan.

The local currency got a small boost from Fonterra's increased forecast price paid to farmers for the 2017 and 2018 seasons, while trade data and Thursday's government budget are also likely to show the domestic economy and Crown accounts are in good shape.

Still, the prospect of rising US interest rates remains the over-arching theme for markets and Mr Johnston expects to see the kiwi dollar around US65c by the end of the year.

The local currency increased to 78.22 yen from 78.01 yen and rose to 62.54 euro cents from 62.37 cents. The kiwi dipped to 53.89 British pence from 54.02 pence.

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