S&P rating lowered one notch, outlook is stable. This comes after the downgrade by Fitch earlier, while Moody’s affirmed its Aaa rating.
Quick 40 pip drop in NZD/USD but it has bounced back. I’m expecting further declines.
The lowering of the foreign and local currency long-term ratings follows our assessment of the likelihood that New Zealand’s external position will deteriorate further at a time when the country’s fiscal settings have been weakened by earthquake-related spending pressures and fiscal stimulus to support growth… New Zealand’s very high external imbalances, which are accompanied by high household and agriculture sector debt, dependence on commodity income, and emerging fiscal pressures associated with its aging population. … “Downward pressure on New Zealand’s ratings could re-emerge if New Zealand’s external position continues to deteriorate,” said Mr. Curry.
