NZ dollar falls as deadline arrives for South Canterbury Finance

The country's second-biggest finance company has until the end of the day to announce a capital injection which would satisfy its trustee, and avoid calling on the government to bail-out distressed investors under the retail deposit guarantee.

A collapse would weigh on investors' optimism over the state of New Zealand's economy, with the financier being a large lender to agriculture sector in the South Island. Global sentiment was muted in the London and New York sessions, with stocks on Wall Street falling amid disappointment Federal Reserve chairman Ben Bernanke didn't announce extra quantitative easing in his speech to the central bankers' summit on Friday.  

"The main thing today is any announcement regarding South Canterbury Finance, which has until the end of the day to come up with a plan, and we'll see whether the government will stump up with some cash or not," said Khoon Goh, head of market economics and strategy at ANZ. "Risk aversion is back and we're seeing risk assets being sold and save haven demand flowing into U.S. government bonds," which is keeping the kiwi under pressure, he said.

The kiwi dropped to 70.68 US cents from 70.98 cents yesterday, and was little changed at 66.30 on the trade-weighted index of major trading partners' currencies from 66.36. It fell to 59.77 yen from 60.12 yen yesterday, and rose to 79.22 Australian cents from 78.95 cents. It was little changed at 55.80 euro cents from 66.78 cents yesterday, and rose to 45.70 pence from 45.58 pence.