The New Zealand dollar dropped back below 66 US cents as stocks across Asia followed Wall Street and Europe lower after weaker-than-expected Chinese manufacturing data last week reignited concern the world's second-biggest economy is slowing.
The kiwi fell to 65.88 US cents at 5pm in Wellington from 66.53 cents at 8am and 66.82 cents on Friday in New York. The trade-weighted index declined to 71.07 from 71.25.
Stocks across Asia dropped on growing fears over the pace of growth in China after a gauge of manufacturing on Friday sapped equity markets on Wall Street and in Europe. China's Shanghai Composite index was down 8.6 per cent in afternoon trading, while Japan's Nikkei 225 index fell 4.1 per cent and Australia's S&P/ASX 200 index declined 3.6 per cent. The dwindling demand for stocks eroded investors' appetite for other risk-sensitive assets, including the kiwi dollar, which is also exposed to China's economy through New Zealand's reliance on exporting to the world's most populous nation.
"We've been sold off with the risk-off tone of equity markets," said Tim Kelleher, head of institutional sales at ASB Institutional in Auckland. "Given equity markets still look like they're going to be heavy for the next two to three days, then kiwi should head back towards support around 65.50 (US cents)."
A BusinessDesk survey of 10 currency analysts predicts the local currency may trade between 64.50 US cents and 68 cents this week. Three expect the kiwi to gain, three say it may fall and four say it will likely remain largely unchanged.
