Kiwi$ slumps as global markets and appetites for risk dissolve

The New Zealand dollar fell to a two year low of 62 US cents overnight as global markets slumped as much as 9% and appetites for risky 'carry trade' currencies such as the Australasian dollars evaporated. (Updated for Dow bounce at the close) The New Zealand stock market is expected to open 3-4% weaker as international investors look to sell and repatriate cash home.  Britain's FTSE 100 fell 7.9%, its biggest fall since the 1987 crash, while European stock markets fell as much as 9%. The Dow closed down 363 points at 9,962 or 3.5% as investors made a last ditch attempt to close above 10,000. At one stage in New York afternoon trade the Dow was down 800 points or nearly 8% at 9,525. Panic swept the Northern Hemisphere markets as concerns about the banking systems on both sides of the Atlantic multiplied along with fears about a deep economic recession. Most of the bad news is coming from Europe, where its banking crisis worsened dramatically over the last 48 hours. The rescues last week of Dutch/Belgian giant Fortis and German's second largest mortgage bank, Hypo Real Estate, collapsed aimd acrimony between governments and the private sector late on Sunday. Holland unilaterally tore up the Fortis rescue and nationalised Fortis' Dutch banking arm to save itself. Germany's commercial banks withdrew in fright from the Hypo bailout when it became clear upon inspection of its books that its funding hole was deeper and darker than expected. Only a German government promise to front up with as much as 50 billion euros and a promise to safeguard personal deposits in all banks stopped runs on banks in Europe's largest economists.  The shock decisions by Ireland and Greece to give government guarantees for their banks' deposits has destroyed any hopes of a pan-European response to the credit crunch and pushed the euro sharply lower. The strong US dollar, ironically because America is seen further along the Credit Crunch path and closer to recovery, underpinned the slump in the New Zealand dollar to its lowest point since August 2006. Meanwhile the oil price fell US$6 a barrel to US$87 a barrel. But unfortunately for New Zealand drivers the slump in the New Zealand dollar means further cuts in petrol prices is unlikely. At 62 US cents and US$87 a barrel, interest.co.nz calculates the price of regular petrol would be around NZ$1.92/litre, assuming tax rates and oil company profit margins don't change.