New Zealand dollar lost ground against its US counterpart on Monday, as market players were abandoning higher-yielding assets, such as the kiwi dollar, amid the ongoing US partial government shutdown.
NZD/USD fell to a session low at 0.8282 at 4:01 GMT, after which consolidation followed at 0.8302, losing 0.29% for the day. Support was likely to be found at October 2nd low, 0.8194, while resistance was to be met at September 24th high, 0.8360.
Investors stepped away from riskier assets and boosted demand for safe haven alternatives to the US dollar, as the budget deadlock in the United States continued. “On the 17th, we run out of our ability to borrow, and Congress is playing with fire,” Treasury Secretary Jacob Lew said on CNN’s “State of the Union” on Monday. “If they don’t extend the debt limit, we have a very, very short window of time before those scenarios start to be played out. If the United States government, for the first time in its history, chooses not to pay its bills on time, we will be in default”.
In addition, the Obama administration has said that it would not negotiate with Republicans over funding the government or raising the debt ceiling. In an interview with the Associated Press, President Barack Obama said that he expected Congress will reach an agreement to raise country’s 16.7 trillion USD debt limit in time to avoid default. In their attempt to end the shutdown, on the other hand, US Republicans aimed at passing legislation that would delay for 1 year the mandate for individuals to buy health insurance, in accordance with President Barack Obama’s 2010 Affordable Care Act. However, Jacob Lew did not define a specific date, when the nation might plunge into default, but according to estimations by the US Treasury, the debt ceiling was expected to be reached no later than October 17th. On the other hand, the United States will have cash at the amount of 30 billion USD and it will be insufficient to meet expenditures that can reach as high as 60 billion USD in subsequent days.
Meanwhile, International Monetary Fund head Christine Lagarde said last week that a failure to raise the US debt limit could pose threats to global economy and also warned that US economic growth could fall below 2% in 2013. A one-week shutdown will probably cut 0.1% from nations GDP, according to the median estimate of experts, participated in a survey by Bloomberg News.
Elsewhere, the kiwi was lower against the Australian dollar, with AUD/USD cross up by 0.13% for the day to trade at 1.1353 at 6:40 GMT.