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Fitch downgrades the NZ credit rating from AA+ to AA

Written by Sam Coxhead on September 30th, 2011.      0 comments

8:10 AM (NZT) 8:10 AM (NZT) Credit rating agency Fitch has downgraded the NZ credit rating from AA+ to AA sighting the high level of external debt and current account deficit as the motive. This is the first such move in 13 years. The rating outlook is now stable. Whilst it is yet to be seen if the move will be followed by more significant agencies Moody’s and S&P, the downgrade hardly comes a surprise. NZ’s reliance on offshore funding markets and the credit storm in Europe, further agency downgrades cannot be ruled out. The NZ Debt Management Office will be more than happy with their front loaded funding decisions. Obviously this has seen the NZD under some pressure since the announcement.
Elsewhere in markets the whippy sideways movement continues. The theme of risk aversion this week has been interrupted by periods of “short” covering as extended moves to the downside for growth assets have been slow in coming. Overnight German politicians approved the extension of funds to the European Financial Stability Fund (EFSF) in what was an expected move. Questions over whether or not Germany will approve the leverage of the EFSF to increase its power remain. The chances of leverage is a low probability at this juncture. There was some positive economic data in the US overnight in terms of a drop below 400k in the weekly jobless claims and an upwards revision in GDP data.
Overall the US dollar remains on the front foot, and risks in Europe remain high. So the uncertainty continues.
After a week of very little Australasian  economic data of note, we have NZ building stats and NBNZ Business Confidence numbers today. Expect these to be of little consequence in the current environment of uncertainty. Ranges for the last 24hrs are below followed by the All Back team to face Canada just announced. Muliaina is of note.
    Last 24 hours trade
  Current level Low High
NZD/USD 0.7655 0.7653 0.7833
AUD/USD 0.9711 0.9702 0.9879
NZD/AUD 0.7880 0.7874 0.7956
AUD/NZD 1.2690 1.2569 1.2700
NZD/GBP 0.4913 0.4905 0.5001
NZD/EUR 0.5650 0.5645 0.574
NZD/YEN 58.77 58.67 60.20
NZD/CAD 0.7962 0.7942 0.8059