By Peter Garnham
Published: June 13 2011 11:32 | Last updated: June 13 2011 11:32
The New Zealand dollar retreated on Monday after a series of tremors rocked Christchurch, the country’s second-largest city.
The news followed a destructive earthquake which hit the city in February that left the country with an estimated recovery bill of about NZ$15bn.
February’s earthquake prompted the Reserve Bank of New Zealand to slash interest rates by 50 basis point to a record low of 2.5 per cent in a bid to aid the recovery process.
In recent weeks, the New Zealand dollar has benefited, however, hitting a record high of $0.8300 against the dollar last week, on expectations that the RBNZ would raise rates by the end of the year as its economy recovered.
The NZ dollar has also benefited from reports that China was poised to invest in the country’s bond market as it diversified its reserves away from the US dollar.
The kiwi dollar lost ground on Monday however, as the fresh quakes prompted investors to scale back expectations of monetary tightening from the RBNZ.
The New Zealand dollar fell 1 per cent to $0.8128 against the US dollar and dropped 1 per cent to Y65.35 against the yen.
Meanwhile, the euro remained under pressure following a sharp sell-off at the end of last week, which saw it retreat from a one-month high against the dollar.
Analysts said the single currency was continuing to suffer from uncertainty concerning a possible rescue package for Greece, with further wrangling between eurozone finance ministers and central bankers putting the euro under pressure.
Jane Foley at Rabobank said the impasse between the German government and the European Central Bank over whether private sector shareholders should bear any pain in a Greek restructuring had become the focus of the eurozone debt crisis.
“It is unclear which party will back down, but unless some form of compromise is agreed upon it appears that a resolution of the current phase of the crisis could be impossible to find,” she said. “The euro could remain on the back foot for the time being.”
The euro, which last Tuesday hit a four-week high of $1.4696 against the dollar, eased 0.1 per cent to $1.4336.
The single currency also lost 0.3 per cent to £0.8817 against the pound, was 0.1 per cent weaker at Y115.24 against the yen and fell 0.3 per cent to a fresh record low of SFr1.2061 against the Swiss franc as investors sought haven from eurozone woes.
