The New Zealand dollar fell after strong demand for Spanish government bonds failed to quell fears Europe will be able to contain a sovereign debt crisis, and European stock markets fell.
The New Zealand dollar fell as low as 81.18 US cents overnight from 81.64 cents yesterday at 5pm. The kiwi traded at 81.38 cents at 8am. The trade weighted index fell to 72.64 from 72.88.
European stock markets declined, with France's CAC 40 index falling 2.1 per cent and Germany's DAX 30 index down 0.9 per cent, after better than expected demand at Spanish and French government bond sales failed to allay concerns the region's debt woes won't get any worse.
The yield on the 10-year Spanish bond was 5.74 per cent compared with 5.4 per cent at the last sale in January, while France's five-year notes sold at an average yield of 1.83 per cent today, up from 1.78 per cent on March 15.
"As long as the market is worried about Spain the New Zealand dollar will struggle on the upside," said Mike Jones, currency strategist at Bank of New Zealand. "It's keeping the kiwi chopping sideways or drifting lower."