KEY POINTS:
The New Zealand dollar could suffer further losses when $3.65 billion of global retail bonds mature this month.
The kiwi has lost almost 8 per cent of its value against the greenback over the past three weeks as global markets have tumbled. It closed at US74.35c yesterday, having fallen as low as US74.01c during Friday's overseas session.
Forex investors continued to respond to the US credit market woes by unwinding risky "carry trade" positions where low-yielding Japanese yen are borrowed to invest in high-yielding kiwi dollars.
But as well as carry trades, the New Zealand dollar has also received key support over the past couple of years from uridashi and eurokiwi bonds. The bonds, issued to retail investors - in financial lore, Japanese housewives and Belgian dentists - offer exposure to New Zealand's world leading interest rates, as well as significant currency risk.
That risk is coming to the fore, with a total of $3.65 billion worth of the bonds reaching the end of their term this month.
Until US sub-prime mortgage lending woes spilled into international markets three weeks ago, the maturing bonds were expected to either be rolled over or replaced by other forms of kiwi-denominated investments.
Bank of New Zealand currency strategist Danica Hampton said apart from $1 billion in previously announced issuance, there had been scant indication the maturities would be offset by new bonds.
"There is a risk that the turbulence in financial markets may discourage some investment."
The bulk of August's maturities crop up on just one day, August 20, when there are $2.53 billion worth.
"The sheer concentration of it presents downside risk."
Deutsche Bank currency strategist John Horner said: "In so far as the perception might be that these investments might not be rolled over into other forms of New Zealand dollar investments, then there is a risk it does weigh on the kiwi.
"However, our work previously has showed the timing of these maturities tends not to have an influence over the kiwi's direction, in part reflecting the fact that they are so well known from so far out."
Horner and Hampton believe investors are far more preoccupied with the fallout from the US problems.
"While maturities may be a focus in the next week or so, they are a peripheral issue and much more important will be risk appetites and how they react to the continuing turmoil in credit and broader financial markets," said Horner.
Hampton said markets were mindful of the possibility that the credit concerns "spill into fears that global growth is falling over".
"That would clearly be bearish for exporting currencies like kiwi and aussie. It's important to keep an eye on industrial metal prices. If we start to see those collapse then that would be a signal of fears for growth in China and the broader world economy."
WALL OF CASH
* The $3.65 billion worth ofuridashi and eurokiwi bonds maturing this month will likely add to the pressure on the fast-falling New Zealand dollar.
* Most of those bonds, $2.53 billion worth, mature on August 20.
