New Zealand dollar drops to five-year low
The New Zealand dollar was trading at a five- year low of about 54.5 US cents on Tuesday, as stock markets and commodity prices continued to fall around the world amid fears of a global recession, dpa reported.
The kiwi dollar has now fallen by 33 per cent against the US greenback this year, Radio New Zealand reported.
Robin Clements, an economist with the Swiss investment bank UBS, was quoted in Wellington's Dominion Post as saying the kiwi was likely to continue falling as the central bank's benchmark interest rate comes down.
The Reserve Bank cut the rate from 7.5 per cent to 6.5 per cent last week and analysts said it was likely to fall to 5 per cent in the second half of next year.
But the Bank of New Zealand's currency strategist Danica Hampton said she did not think the kiwi would be weak for a long period.
Hampton told Radio New Zealand that she did not predict a prolonged fall as at the turn of the century, when the kiwi dollar spent about two years below 50 US cents.
She said a combination of lower currency, lower interest rates and increased government spending expected in 2009 would eventually help the economy find its feet.