The New Zealand dollar became the first casualty of the bigger than expected Danish vote against joining the European currency unit, the euro.
From its local open of US41.26c the dollar traded down as the magnitude of the "no" vote in the Danish referendum became known.
But the currency weakened further when Statistics New Zealand reported that GDP shrank 0.7 per cent in the second quarter compared with the first quarter, more than economists' predicted 0.4 per cent.
One dealer said the currency reached its session low of US40.53c after a ate customer order to sell.
The session high was US41.35c.
The New Zealand dollar is now this year's worst performing currency in the developed world, down 22 per cent.
The euro had a quiet day in Asian markets after initially falling against the United States dollar and the Japanese yen.
But the spectre of central-bank buying of euros helped forestall a sharp drop.
Danish Prime Minister Poul Nyrup Rasmussen conceded defeat, shortly before preliminary results showed 53.1 per cent of Danes had voted against joining the euro compared to 46.9 per cent for.
With the "no" vote slightly wider than early polls indicated, the euro dropped a quarter of a cent late in New York trade on Friday to close at 87.80USc.
In Asia it held at US88c as markets waited for a lead from Europe on its direction.
Only fears that the European central bank would repeat last Friday's bout of euro buying prevented a major meltdown, analysts said.
"The intervention is still fresh in everybody's mind. Any downside for the euro might be limited because the market is unwilling to test the resolve of the Group of Seven," Lisa Conte, a currency-analyst at Prudential Securities said.
Intervention jitters were lifted earlier in the day when a member of the German Bundesbank's governing council raised the spectre of another round of G7 euro buying.
Klaus-Dieter Kuehbacher said a "no" vote would hurt confidence in the euro, and that central banks would probably repeat last Friday's market intervention to buoy the euro if the currency was hurt by a rejection in the Danish poll.
Traders had warned that a rejection by prosperous Denmark of the struggling currency, which has crumpled almost 25 per cent since its launch 21 months ago, was tantamount to a vote of no confidence in the European project.
European officials put on a brave face after the disappointing result.
German Bundesbank president, Ernst Welteke, said the referendum did not change positive growth expectations in Europe and that European growth would contribute to a strong euro when the European central bank maintained price stability.
European Commission president, Romano Prodi, expressed his regret over the decision, and IMF chief economist Michael Mussa said he saw only a small short-term negative effect on the euro.
But analysts said the Danish rejection would eventually cast a cloud over the currency.
"In the larger scheme, it's not a positive for the euro in that the northern Europeans are really wealthy countries and in good macro-economic shape, so monetary union would be stronger with them in than with them out - that's pretty clear," said Nic Pifer, a spokesman for American Express.
- WIRE SERVICES
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Danish vote sinks dollar to bottom of barrel
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