The New Zealand dollar fell below 83 US cents and breached a key technical support level on fears the inconclusive Italian election could herald a return to populist, anti-EU policy, which could spread to other indebted nations in the region.
The New Zealand dollar fell to 82.58 US cents from 83.39 cents at 5pm in Wellington yesterday. The currency broke through its 100-day moving average of 82.94 cents in New York trading. The trade-weighted index declined to 75.59 from 76.28.
The yield on Italy's 10-year bonds shot up 40 basis points to a 14 year high and the sell-off spread to bonds in Portugal and Spain after Pier Luigi Bersani won control of the lower house and Silvio Berlusconi's party gained a blocking share of the senate. The kiwi didn't move much after Federal Reserve chairman Ben Bernanke defended the bank's asset purchases.
The kiwi's break through a key support level saw the sell-off "accelerate very quickly as stops got taken out," said Stuart Ive, a strategist at HiFX. "It's risk off on the back of the Italian election. The key to this is whether they're going to get some sort of stability or are they going to a deeper and darker place."
In the first of his two-day senate testimony, Bernanke said the benefits of the Fed's vast asset purchases outweighed the risks, helping lift growth while inflation remained tame.
