2011.03.0323:36:00UTC+00NZ Dollar Falls On IMF Warning Of Lower Economic Growth

Friday in Asia, the New Zealand dollar declined against other major currencies as traders sold the NZ currency in reaction to the International Monetary Fund's warning of lower economic growth in New Zealand.

The International Monetary Fund said on Thursday that it is likely to revise down its economic growth forecast for New Zealand following last week's devastating earthquake in Christchurch.

The fund said it will be sending a delegation to the Pacific nation at the end of next week to assess the economic damage from the quake.

New Zealand Prime Minister John Key has estimated a 15 billion New Zealand dollar (US$11.1 billion) blow to gross domestic product from tremors that have destroyed large areas of Christchurch on February 22.

The IMF's statement will add to pressure on ratings agencies to adjust their view on New Zealand's central bank, which is widely expected to cut rates by either 0.25 percent or 0.5 percent at its policy meeting next week.

Moody's Investors Service said last week that it would "await a fuller assessment of the long-term effects on government finances." Moody's rates New Zealand with a top grading and a stable outlook.

The New Zealand dollar, which closed yesterday's trading at 0.7405 against the U.S. dollar fell to a 2- 1/2 -month low of 0.7370 in Asian deals on Friday. The next downside target level for the NZ dollar is seen at 0.735.

The NZ dollar has been declining against the U.S. dollar after it reached more than a 2-month high of 0.7827 on February 02. Tensions over the Libya, rising crude oil prices and a deadly earthquake in New Zealand's second-largest city of Christchurch also exerted selling pressure on the kiwi in the subsequent weeks.

The kiwi-greenback pair has dropped 5.8% thus far from more than a 2-month high of 0.7827 hit in early February.

During Asian deals on Friday, the New Zealand dollar slipped to a 2-day low of 60.71 against the Japanese yen. If the kiwi weakens further, it may breach the 60.5 level and target the 60.0 level.

The kiwi-yen pair that strengthened to a 2-month high of 64.28 on January 27 has lost 6% since then and touched more than a 4-month low of 60.49 on March 02. Although the kiwi rebounded in Asian trading yesterday on stocks rise following a better-than-expected U.S. ADP employment report, it fell back again in the New York session. The pair closed yesterday's trading at 61.07.

The New Zealand dollar dropped to a fresh 19-year low of 1.3739 against the Australian dollar in Asian deals on Friday. If the NZ dollar declines further, 1.400 is seen as the next likely target level. At yesterday's close, the aussie-kiwi pair was quoted at 1.3691.

The NZ dollar fell to a decade low of 1.3531 against the aussie in late December last year. Although the kiwi gained in January this year, it weakened again in February and broke the 2010 low of 1.3531 last week as the deadly earthquake in New Zealand raised worries about the nation's economic growth and the government expects that the cost of damage would be higher than the September 2010 quake.

In Asian deals on Friday, the New Zealand dollar declined to a 10- 1/2 -month low of 1.8942 against the euro. The next downside target level for the kiwi is seen at 1.900. The euro-kiwi pair closed yesterday's trading at 1.8853.

The New Zealand dollar has been weakening against the euro after it rose to near a 3- 1/2 -year high of 1.6910 on January 10. The kiwi has depreciated 12% against the euro thus far.

There are no major economic reports due in the European session today.

Major focus of the day will be on the U.S. Labor Department's monthly non-farm payroll report, which is due for release at 8:30 am ET. Economists expect non-farm payrolls for February to increase by 180,000, but they expect the unemployment rate to tick up to 9.1 percent.

The U.S. Commerce Department is due to release its report on factory goods orders for January at 10 am ET.