Dec. 24 (BusinessDesk) - The New Zealand dollar edged lower in abbreviated local trading as stalled negotiations to stave off US$600 billion in tax hikes and Federal spending cuts erode investor optimism the day before the Christmas holidays.
The kiwi fell to 82.15 US cents at 1.30pm in Wellington from 82.32 cents at 8.30am and 82.37 cents on Friday in New York. The trade-weighted index declined to 73.56 from 73.69 last week.
Trading was light as New Zealand markets were open for a shortened session on Christmas Eve. Investors have pared back their hopes US legislators will set aside partisan differences and reach a deal to avert the fiscal cliff, which will likely plunge the world's biggest economy back into recession. The stalemate is nearing crisis point with politicians set to come back after Christmas to find a solution before the changes are enacted on Jan. 1.
"There's no progress on the fiscal cliff and that doesn't augur well for things," said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional. The kiwi dollar may drift towards 81.75/82 US cents, "but it's not about to break through the range," he said.
The decline in the Australian and New Zealand dollars was exacerbated by the biggest speculative long positions since 2003 in the currencies, Kelleher said. That makes them more vulnerable to a sell-off when US equities declined.
The New Zealand dollar traded at 69.33 yen from 69.36 yen on Friday in New York, and edged down to 79.07 Australian cents from 79.12 cents last week. The currency was little changed at 62.55 euro cents from 62.49 cents on Friday in New York, and traded at 50.85 British pence from 50.96 pence.