KEY POINTS:
The New Zealand dollar was relatively unchanged this morning after being dumped in afternoon trading yesterday.
The NZ dollar was buying US53.43c at 8am today from US53.40c at 5pm yesterday. It fell as low as US52.89c overnight.
A day of profit taking from recent moves was needed to help stabilise the NZ dollar, ANZ economist Philip Borkin said.
"Initial support at US52.84c may be out of reach today but a weakening euro should assist a test in the coming week."
The NZ dollar was buying 0.4065 euro this morning from 0.4055 at local close last night.
Against the Australian dollar the kiwi was down to A80.60c from A81.30c.
"Markets needed to look more closely at the Australian employment data yesterday before seeing the reality. (The) resulting Australian dollar weakness was nothing compared to that of the NZ dollar," Borkin said.
The kiwi was up slightly against the Japanese yen to 47.97 from 47.38 and down against the British pound to 36.47p from 36.54p.
The Trade Weighted Index was little changed at 53.34, from 53.30.
The New Zealand dollar dived sharply yesterday afternoon, shedding a full cent against the US dollar during the time it took Government Cabinet ministers to hold their crisis meeting on the economy.
The kiwi has now lost more than 8 per cent since Tuesday's shock business confidence data and a credit warning from Standard & Poor's.
It hit a seven-year low against the Japanese yen as Asian stock markets fell sharply.
New Zealand's NZX-50 index had its worst day of the year, falling 1.58 per cent to 2742.84.
Currency strategists say the week's drop probably marks "the beginning of the big move" lower which was tipped last year.
Having enjoyed something of a rally between mid-December and the start of this month, during which it peaked at US60.30c a week ago, the kiwi came down to earth with a bump after the New Zealand Institute for Economic Research on Tuesday released its gloomiest Quarterly Survey of Business Opinion (QSBO) in decades.
Westpac senior markets strategist Imre Speizer said Standard & Poor's warning the same day that New Zealand's sovereign foreign currency credit rating is at risk of a downgrade constituted "a booting when we were already on the floor".
The double blow came against a backdrop of a worsening global outlook with the latest bad news including soft European data, terrible US retail sales data and weakness in global financial sector equities which saw sharp falls on European and US stock indices.
Investors responded by ditching growth sensitive currencies such as the New Zealand dollar in favour of the relative safety of US dollar and Japanese yen, said BNZ currency strategist Danica Hampton.
The NZ dollar reached US54.50c at around 1pm, but by 3pm was trading as low as US53.30c before closing at US53.40c.
Speizer said the most significant factor remained the QSBO which backed up mounting anecdotal evidence that the local economy was faring worse than previously thought.
"The new raft of terrible numbers has shocked people and has caused economists to reappraise their growth forecasts lower."
The kiwi's slide was exacerbated as currency market players who had made wrong bets on where the local unit would go had to exit long positions, while others put new positions in place to reflect the revised outlook.
Recent events probably marked "the beginning of the longer term big decline that we've been talking about for some time", said Speizer, who said in December that the kiwi was headed for the US45c mark late in the first quarter or early in the second quarter of this year.
Westpac was looking for a window of US45c to US50c but Speizer said it could possibly go lower than that.
Earl White of Bankcorp Treasury Services said this week's moves "could be a little bit overdone".
White believed fair value for the kiwi was closer to US60c than US50c, "but who knows, we could shoot down until we have a four on the front".
"It's pretty dangerous to speculate where things could go but overall if ongoing fundamentals are weak and the outlook remains gloomy, the New Zealand dollar's a small illiquid currency at the bottom of the world and it's going to probably suffer more than it needs to."
The New Zealand dollar was also down against the Australian dollar at A81.30c by 5pm yesterday, from A82.40c at 5pm on Wednesday.
Against the euro, the kiwi slipped to 0.4055 from 0.4192 and against the yen it fell from 49.73 to 47.38. The trade weighted index closed yesterday at 53.30 from 55.16 the day before.
NZPA/ADAM BENNETT
