By Yoke Har Lee
The New Zealand dollar's weakness was compounded yesterday by Finance Minister Sir William Birch comments that the Reserve Bank might need to consider the weak third quarter GDP when it next reviews its stance on interest rates.
Dealers took that news to be negative, selling the kiwi which fell to the day's low of just near 51.10 US cents from Monday's closing levels of around 51.70c. Buyers emerged at 51.19c during the afternoon.
Sir William's comments were carried by the Dow Jones newswire. He is currently visiting Washington for the IMF and World Bank annual meetings.
Reuters quoted a report by Banque Nationale de Paris in Australia saying that the kiwi is likely to fall to 46c, and perhaps to 40c in two years.
Weakness in the kiwi against the US dollar sparked off stop-loss selling at around the 51.50c level and sales in the Kiwi/Aussie cross.
One dealer said: "The market's seen a lot of kiwi/aussie selling. Also Sir William's comments has taken the market by surprise."
The Aussie dollar's recent strength, on the back of resurging gold prices, was also reason for the kiwi's weakness against the aussie.
Yesterday, the kiwi/aussie cross fell to 78.72c per Aussie dollar in late trading, against Monday's 79.93c close.
But over the medium-term, the kiwi could benefit from the aussie's renewed vigour.
The near-term outlook remains mixed. One dealer said: "It is really going to depend on the aussie. The kiwi's poor GDP didn't help us but as long as the aussie is supported, the kiwi should be supported to a certain extent.
"As the aussie grinds higher, the kiwi will grind higher to a lesser extent."
But another dealer was less sanguine about the aussie's robustness saying: "You are going to need a substantial movement in gold to make a difference to the aussie."
Birch blamed for kiwi's further slide
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