RTTNews - Friday morning in Asia, the New Zealand dollar fell sharply against its major counterparts after a report showed that New Zealand's economy shrank for a fifth consecutive quarter in the three months to March and recorded its first annual decline in economic activity since 1992.

The kiwi plunged to a 4-day low against the Aussie. Meanwhile, the kiwi slipped from a 2-day high against the greenback and weekly highs against the euro and the yen.

Figures published by Statistics New Zealand today show gross domestic product fell 1 per cent in the March quarter, following a revised fall of 1 per cent in the December quarter.

The economy shrank 2.7 percent from a year earlier. In the year ended March 31, gross domestic product declined 1 percent, the first annual-average contraction since 1992.

It is the first time since the series started in 1986 that GDP has declined for five straight quarters, while the 1 per cent declines of the December and March quarters were the largest for 18 years.

New Zealand's economy began contracting in the first quarter of last year and is unlikely to grow until the final three months of 2009 as the worst global slump since the Great Depression curbs exports and damps investment, Reserve Bank Governor Alan Bollard said June 11. Interest rates may stay at record lows until late next year to kick-start spending, he said.

Business investment slumped, companies began firing workers, exports slowed and tourist arrivals declined. Exports make up about 30 percent of the economy and the tourism industry contributes another 10 percent.

New Zealand's economy will probably contract 2.9 percent this year before growing 0.6 percent in 2010, the OECD said. The jobless rate, which was 5 percent in the first quarter, may surge beyond 8 percent by next year, it said.

The New Zealand dollar slumped to a 4-day low of 1.2554 against the Australian dollar in Asian deals on Friday. The next downside target level for the kiwi is seen at 1.261. The aussie-kiwi pair was worth 1.2446 at Thursday's close.

The kiwi has lost more than 1% against the aussie after it reached a new multi-week high of 1.2396 on Wednesday.

The aussie jumped as the International Monetary Fund said on Wednesday that Australia's economy will shrink less than forecast this year and grow at more than double the anticipated pace in 2010, helped by stimulus measures.

In preliminary staff findings released from Washington, the lender said Australia's economy will shrink 0.5 percent this year, compared with a 1.4 percent drop predicted in April. The economy will grow about 1.5 percent next year, the IMF said, after previously predicting a 0.6 percent gain.

The New Zealand dollar that advanced to a weekly high of 62.16 against the Japanese yen before the GDP report pared gains thereafter. The kiwi edged sharply down to 61.56 at 6:45 pm ET.

Thereafter, the kiwi attempted to reverse direction as the yen weakened after a government report showed that consumer prices in Japan contracted sharply in May.

Japan's Ministry of Internal Affairs and Communications reported that the overall Consumer Price Index fell by 1.1% in May, and the Core CPI, which excludes volatile fresh food prices, also fell 1.1%.

Falling energy prices led to the lower price readings. The overall CPI for the Tokyo Metropolitan region, which is seen as a leading indicator for the national picture, contracted 1.5% in June, while Tokyo Core CPI was down 1.3%.

However, after hitting a high of 61.93 at 12:55 am ET, the kiwi-yen pair fell again and is now worth 61.73 with 61.1 seen as the near term support level. At yesterday's close, the kiwi-yen pair was quoted at 61.96.

The New Zealand dollar declined against the common currency of Europe after hitting a 1-week high of 2.1638 around 6:30 pm ET. At present, the euro-kiwi pair is worth 2.1830 and this may be compared to yesterday's close of 2.1677. In near-term, support is seen at the 2.194 level for the NZ currency.

The New Zealand dollar that rose to a 2-day high of 0.6472 against the greenback around 6:00 pm ET lost ground thereafter. The kiwi declined to 0.6413 around 6:45 pm ET. Although the kiwi bounced back thereafter, it pulled back again shortly and the pair is presently trading at 0.6433. If the NZ dollar slides further, it may likely target the 0.635 level. The kiwi-buck pair was quoted at 0.6459 at Thursday's New York session close.

In the upcoming hours, the French final first quarter GDP is expected.

Across the Atlantic, the Bureau of Economic Analysis is due to release its personal income & outlays report for May at 8:30 am ET. Economists estimate the report to show that personal income rose 0.2% and the personal spending increased 0.4% in the month.

At 10:00 am ET, the Reuters/University of Michigan's final report on the consumer sentiment index for June is scheduled to be released. Consumer confidence is expected to rise in the month, with economists forecasting an increase in the index to 69 from the previous month's reading of 68.7.

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