February 22nd, 2011
08:12 AM GMT
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(CNN) – As rescue crews continued to search through the rubble for survivors of the deadly Christchurch earthquake, Tuesday’s temblor already has shaken confidence in New Zealand’s fragile economy.

The New Zealand currency, known as the kiwi, dropped about 2% in trading in the hours following the quake, which struck in the early afternoon in the country’s financial center and second largest city. The earthquake comes just five months after a nighttime earthquake hit the city, causing $3 billion damage to the area but no deaths. Tuesday’s quake was centered closer to the city and shallower than the September quake, causing more damage and deaths during the busy lunchtime hour when it struck.

“Whatever rebuilding that was going to occur [after the September quake] was only just getting started, so you have to presume that process has to start all over again,” said Michael Turner, a strategist at RBC Capital Markets in Sydney.

New Zealand’s economy was already limping after credit ratings agencies put the government on negative watch late last year due to growing debt. New Zealand was hit hard by the financial crisis with high levels of government and household debt. The government has promised an austere budget and the sale of state assets to return the government’s budget to a surplus by 2015.

Citibank Group had forecast that the Reserve Bank of New Zealand would increase interest rates this year, but Citibank economist Akash B. Reddy believes the new earthquake makes any interest rate hike unlikely until the latter half of 2012. “We may even see an interest rate cut,” Reddy said.

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soundoff (6 Responses)
  1. aurora

    oh...that's too bad.I'm sorry to hear that :(

    February 22, 2011 at 8:46 am |
  2. Justina

    Prayers for New Zealand. Too many atheists there.

    February 23, 2011 at 12:34 am |
  3. Pubali Batash

    Disaster have no rules. It was the second time a major quake hit the city of 350,000 in five months. Videos I get at http://fms.nu/gnfRcJ was very shocking. Tuesday's 6.3-magnitude temblor struck closer to downtown than a quake that heavily damaged Christchurch last September but caused no deaths when it struck before dawn on a weekend.

    February 23, 2011 at 7:35 am |
  4. Pinky

    I'm a NZer and in my entire life I have never heard of the NZ dollar referred to as the 'kiwi.' NZer's are kiwis but our dollar is the dollar. And Justina – you are FIH. What a nuts thing to say.

    February 23, 2011 at 8:54 am |
  5. gratis

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    June 15, 2012 at 2:29 am |
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    January 2, 2013 at 10:20 pm |

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