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NZ dollar skids as business confidence slumps; Aussie weakens on disappointing data
[SYDNEY] The New Zealand dollar skidded on Thursday after a gauge of business confidence fell again in August to hit a decade low, while the Australian currency eased on disappointing capital expenditure data.
The kiwi snapped four straight sessions of gains to stumble 0.7 per cent to US$0.6659, the weakest since Aug 24. It was last down 0.6 per cent at US$0.6669.
Traders feared a slump in business sentiment would hurt hirings and spending which would in-turn dampen New Zealand's economic growth.
A net 50.3 per cent of survey respondents expected economic conditions to deteriorate in the year ahead, the ANZ Bank survey showed, the most pessimistic result since April 2008 and a decline from July's 44.9 per cent.
"It seems increasingly inevitable that wariness amongst firms will have real impacts, in the near term at least, as investment and employment decisions are deferred," said Sharon Zollner, chief economist at ANZ Bank.
New Zealand central bank governor Adrian Orr has said an economic slowdown could force the bank to further ease policy from current record lows of 1.75 per cent.
Across the Tasman Sea, the Australian dollar slipped about a third of a US cent to US$0.7276 after official figures showed business investment surprisingly fell 2.5 per cent. Analysts had expected a 0.6 per cent gain.
Spending on equipment, plant and machinery dipped 0.9 per cent and will prove a small drag on economic growth in the second quarter.
"It is still early days, but a continuation of this trend would be concerning," Daniel Gradwell, a Melbourne-based senior economist at ANZ, said in a note to clients.
"The outlook now suggests that capex will rise only marginally in 2018/19, down from the 5 per cent growth expected in the Q1 report," he said.
Business associations were dismayed last week when the Liberal Party, which controls Australia's conservative government, ousted Prime Minister Malcolm Turnbull and replaced him with former treasurer Scott Morrison.
New Zealand government bonds gained, sending yields about four to five basis point lower across the curve.
Australian government bond futures were mixed, with the three-year bond contract unchanged at 97.980. The 10-year contract eased two ticks to 97.43.