Poor economic data sees NZ dollar drop

Disappointing economic data coming out of New Zealand has seen the NZ dollar slip against the US dollar. The currency hit a low of 0.8139 on Tuesday before clawing back to 0.8158.

New Zealand’s consumer price inflation for the third quarter was 0.03 per cent according to official figures, which is the same as the previous quarter. However, analysts had expected a rise of 0.6 per cent.

Investors are currently focusing on Europe and hopes that debt ridden Spain will imminently ask Europe for a financial bailout. If this happens then borrowing costs in the recession laden country are likely to come down as the European Central Bank helps to absorb its debt by buying bonds. The euro was strengthened by news that Spain’s credit rating is not going to be junked by Moody’s and has been allowed to cling on to its investment grade.

European leaders are due to meet at the end of the week in Brussels. However, Greece has warned that it is unlikely to be able to reach an agreement on deficit reductions with its international debtors by the time the summit is underway.

The New Zealand dollar has also retreated against its Australian counterpart. The Aussie dollar was up 0.61 per cent to 1.2599. The Reserve Bank of Australia is currently looking at ways of cutting borrowing in reaction to the economic slowdown in Asia and the predicted effect this will have on the Aussie mining industry.