KEY POINTS:
The New Zealand dollar lost over one US cent today on heightened risk aversion spurred by tumbling equity markets.
Having risen to a month high of US79.16c yesterday, the kiwi dived over a cent to US78.06c by 5pm today.
Westpac market strategist Michael Gordon said the kiwi was sold heavily during the morning as markets opened to bad news from the US, including heavy subprime losses by Citigroup .
It hit a low of US$77.37c but had recovered somewhat in the afternoon, although buying was weak.
Market jitters about world growth are prompting investors to reduce "risky" positions in high-yielding currencies such as the NZ and Australian dollars.
The Japanese yen was the big winner in that regard, easing to 83.07 against the kiwi compared with 85.39 at yesterday's local close.
The kiwi also ceded ground to the aussie, closing at A88.12c compared with A87.89c, although the Australian dollar also softened to US88.58c against US90.06c yesterday.
"There is a flight to safety with some unwind of carry trades and high yielders getting hurt," said Ron Simpson, director of currency research at Action Economics in Tampa, Florida.
Mr Gordon said hopes that the US Federal Reserve might cut interest rates tonight, ahead of its meeting later this month, made tonight's action difficult to predict.
"Certainly the expectation that the Fed will do something to prop up the US economy has been helping to underwrite markets in recent days so if something happens overnight, it could be a big boost for the kiwi."
Offshore, the greenback hit a 2-1/2 year low against the yen and a record low versus the Swiss franc on Wednesday, hurt by fears of a US recession and speculation about the early rate cut.
Currency rates:
NZ dlr/US dlr US78.06 US79.16
NZ dlr/Aust dlr A88.12c A87.89c
NZ dlr/euro 0.5256 0.5321
NZ dlr/yen 83.07 85.39
NZ dlr/stg 39.73 40.44p
NZ TWI 71.68 72.60
Australian dollar US88.58c US90.06c
Euro/US dollar 1.4858 1.4878
US dollar/yen 106.41 107.86
- NZPA
