Kiwi drops to six-month low as World Bank cuts Asian growth

BUSINESSDESK: The kiwi slipped to a six-month low after the World Bank downgraded its forecast growth across Asia, and ahead of a European Union summit where leaders are expected to struggle to resolve the region's debt crisis.

It fell to 75.24 US cents at 5pm from 75.40 cents at 8am, and was down from 76.52 cents yesterday.

The trade-weighted index dropped to 68.48 from 69.23 yesterday.

The World Bank downgraded its forecast for growth across Asia and the Pacific in 2012 to 7.6% from 7.8% in its November report.

The slowdown was blamed on lower growth in manufacturing exports and supply disruptions from the spate of natural disasters last year.

The Dollar Index, a measure of the greenback against a basket of currencies, rose 0.2% to 81.62 as investors looked for so-called "safe haven"assets.

"Investors are still piling into the US dollar at the expense, in particular of the kiwi and Aussie," said Mike Jones, currency strategist at Bank of New Zealand, referring to the trans-Tasman currencies colloquially.

"We are seeing some exporters' hedging demand now we're seeing a 75 handle" on the kiwi dollar." 

Leaders of the 27-member EU meet in Brussels early tomorrow are set to discuss the region's sovereign debt woes.

European Council president Herman Van Rompuy dashed expectations of a resolution on Monday, saying no final decision would be made.

The kiwi fell to 59.35 euro cents from 59.82 cents yesterday, and dropped to 47.79 pence from 48.37 pence.

The Bank of Japan held interest rates near zero percent, and kept its quantitative easing programme at 40 trillion yen, dashing hopes the world's third-biggest economy would get some more stimulus.

The New Zealand dollar fell to 59.91 yen from 60.73 yen yesterday.

Finance Minister Bill English’s fourth Budget will be announced tomorrow.

He is expected tomorrow to unveil a path towards getting the government’s books back into operating surplus in 2014-15, and has promised a second successive "zero" Budget.

The kiwi was little changed at 76.96 Australian cents from 77.02 cents yesterday.