2009.01.1304:40:00UTC+00New Zealand Dollar Weakens To 4-Week Low Versus US Dollar And Yen

Tuesday during early deals, the New Zealand dollar weakened to a 4-week low against its US and Japanese counterparts as the nation's foreign currency debt outlook has been downgraded by Standard & Poor's to "negative." The currency dropped to new multi-day lows versus its European and Australian counterparts as nation's businesses grew more pessimistic about the economic outlook and their earnings.

"The negative outlook on the foreign currency rating reflects the likelihood of a rating downgrade if external imbalances begin to pressure the country's investment, growth, and fiscal performance," S&P's Analyst Kyran Curry said. The outlook could result in a downgrade to New Zealand's current AA+ credit rating, S&P said, if the country's current account deficit and overseas debt begin to hurt growth and investment.

The quarterly survey results published by the New Zealand Institute of Economic Research (NZIER) revealed marked weakness in the domestic economy, which increases the probability of further rate cuts by the Reserve Bank of New Zealand. New Zealand's GDP may have declined again in the fourth quarter, resulting in negative economic growth for the whole of 2008, according to the survey.

The survey results also showed that business confidence indicators deteriorated in all the four sectors, namely manufacturing, construction, merchandising and services. The New Zealand dollar hit a 4-week low of 49.33 against the Japanese yen and 0.5545 versus the US dollar by about 4:05 am ET Tuesday, compared to Monday's closing values of 51.41 and 0.5759, respectively. The next downside target levels for the kiwi-dollar pair and kiwi-yen pair is seen around the 0.544 level and 48.1 level respectively.

Japan's unadjusted current account surplus for November stood at 581.2 billion yen, the Ministry of Finance said today - down 65.9 percent on year. The surplus was 960.5 billion yen in October and 1.7058 trillion yen in November of 2007.

Additionally, the Bank of Japan said that the Japanese bank lending to banks excluding trusts was up 4.1 percent on year, up from the 3.6 percent annual gain in November. Including trusts, lending was up 3.7 percent on year from the 3.2 percent annual gain in the previous month. Seasonally adjusted, lending was up 4.6 percent compared to 4.1 percent a month earlier.

The New Zealand dollar edged down against its European counterpart on Tuesday's early trading. At about 4:10 am ET, the kiwi dipped to an 11-day low of 2.391 against the euro, with downside target level of 2.418. The pair closed Monday's deals at 2.3208.

The German Federal Statistical Office announced that the index of selling prices in wholesale trade declined 3.3% year-over-year in December, compared with a 0.8% fall in the previous month. This was the highest price decline since March 1999. Economists were looking for a decrease of 2.1%. In 2008, the wholesale price index rose 5.4% compared to the previous year.

In trading against its Australian counterpart, the NZ kiwi dropped to a 6-day low of 1.2110 during Tuesday's early trading. The Aussie-kiwi pair closed yesterday's deals at 1.1847. If the NZ currency slips further, it may likely target the 1.220 level against the Australian dollar.

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