New Zealand dollar lost ground sharply against the greenback on Wednesday, reaching the lowest point in two-weeks, as risk appetite was dampened because of the uncertain effect upon global economy by the US government shutdown.
NZD/USD fell to a session low at 0.8194 at 2:30 GMT, also the pairs lowest point since September 17th, after which consolidation followed at 0.8223, losing 0.68% for the day. Support was likely to be received at September 17th low, 0.8158, while resistance was to be met at current session high, 0.8280.
Demand for high-yielding currencies, such as the kiwi dollar, was dampened, because concerns appeared that the first government shutdown in 17 years may pose a threat to economic recovery in the United States, but also could influence global economy, and this could urge the Federal Reserve Bank to maintain the pace of its monetary stimulus for a longer period than expected. At the same time, Treasury Secretary Jacob Lew urged the US Congress to extend country’s borrowing authority “immediately,” in a letter addressed to House Speaker John Boehner yesterday. According to Lew, the United States has begun using the final extraordinary measures to prevent a breach of the debt ceiling, as he again said that measures might be exhausted no later than October 17th. When this happens, “we will be left to meet our country’s commitments at that time with only approximately $30 billion,” Lew said, cited by Bloomberg, “far short of net expenditures on certain days, which can be as high as $60 billion.”.
“The U.S. Treasury is the center of the global financial complex,” Bill Gross, manager at Pacific Investment Management Co. said during a Bloomberg Television interview. A default would be “unimaginable,” as it would induce “catastrophic” consequences on US borrowing costs, and also would trigger a “complex series of events worldwide” that would affect global financial markets.
Meanwhile, the kiwi dollar was almost unchanged against the Aussie, with AUD/NZD cross dipping a mere 0.01% for the day to trade at 1.1362 at 9:01 GMT.
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