NZ dollar drops below US69c after RBNZ report
10:40 AM Wednesday May 19, 2010

The New Zealand dollar dropped below US69 cents for the first time since early March after Reserve Bank Governor Alan Bollard flagged the risks of contagion from Europe's debt crisis and reiterated his view that a low kiwi was desirable.

Bollard told journalists in Wellington after the release of the bank's Financial Stability Report that New Zealand "could be vulnerable to any renewed deterioration in global debt markets" and the sovereign debt crisis in Europe may provoke "further turbulence if adequate progress is not made."

The kiwi dollar has weakened in the face of falling commodity prices and increased risk aversion stemming from Europe.

A gradual depreciation of the New Zealand dollar "remains desirable for a sustainable rebalancing of the New Zealand economy," the report said.

Stocks on Wall Street fell overnight, with the Standard & Poor's 500 Index sliding 1.4% amid concern the global economic recovery could be undermined. The euro sank to a new four-year low after Germany banned naked short selling of shares in that nation's biggest financial firms, stoking concern it will encourage traders to bet against the regional currency.

More here.