KEY POINTS:
The New Zealand dollar was shaken roughly overnight as equity markets in the United States and Europe fell sharply amid further turmoil in the global financial system.
By 8am the US dollar was falling against the euro, amid increased risk aversion after investment bank Lehman Brothers filed for bankruptcy protection, spurring a stock market sell-off.
The yen rallied on the unwinding of carry trades, in which investors borrow low yielding currencies such as the yen to invest in higher yielding riskier assets such as the NZ dollar.
Some initial support for the New Zealand dollar off the back of US dollar weakness had seen the kiwi get to around US67.15c late yesterday evening.
But that reversed overnight and the NZ dollar dropped below US65.40c at one point, before recovering some ground to US66.07c by 8am.
At today's local open the kiwi was at 69.29 yen from 70.85 at 5pm. Against the euro, the NZ dollar was buying 0.4617 at 8am from 0.4650.
The kiwi was also at A81.77c against the Australian dollar from A81.40c at the local close, while the trade weighted index was 62.59 at 8am from 63.19.
The greenback had managed to hold gains against the euro for most of the New York session, but as Wall Street benchmark indexes extended losses in late trading, the US currency fell in their wake.
In its morning update today, ANZ bank said the events of yesterday (NZT) had a massive impact on markets around the globe overnight.
Perceived safe-haven currencies, the US dollar and yen, were in demand, sending high yielding currencies such as the NZ and Australian dollars, the euro and sterling lower from late yesterday.
Bank of New Zealand currency strategist Danica Hampton said escalating risk aversion and concern that problems in the US financial sector will spill across into global issues were taking a toll on risk sensitive currencies, such as the kiwi against the yen.
- NZPA
