KEY POINTS:
The New Zealand dollar remained lower today, shrugging off stronger-than-expected inflation and its implications for higher domestic interest rates.
The kiwi struggled to regain much of the US cent lost overnight, when it hit a low of US76.40c as investors switched to assets considered less risky in the wake of big falls on equity markets.
By 5pm, the kiwi had slipped to US76.86c from US78.06c late yesterday afternoon. Against the Australian dollar, it was at A87.29c from A88.12c, despite a 50-point fall for the Aussie against the US dollar.
The kiwi was also weaker against the euro, yen and sterling.
The currency has lost around 3 US cents from Monday's month high above US79c.
"Most focus is on the risk aversion trade, that's why we've seen the kiwi continue to sell off even with the stronger CPI data," said ANZ Institutional Bank chief foreign exchange dealer Murray Hindley.
Fourth quarter Consumers Price Index inflation was a surprisingly strong 1.2 percent, pushing the annual inflation rate to 3.2 percent, above the Reserve Bank's target of 1 to 3 percent.
Such a rise in inflation would worry the central bank, which reviews interest rates next Thursday, although it was mainly on the back of higher fuel and other commodity prices. Domestic-sourced inflation was at its lowest rate in four years.
Market jitters about world growth were prompting investors to reduce "risky" positions in high-yielding currencies such as the NZ and Australian dollars.
US stock markets fell overnight in reaction to heavy subprime losses by US bank Citigroup and poor US retail sales figures.
A disappointing profit and outlook from Intel Corp, the world's largest chip maker, drove the S&P 500 to its lowest closing level in 14 months.
The US dollar held overnight gains against the euro after comments from a European Central Bank official fuelled fears that US economic weakness may be spreading to Europe, knocking the common currency.
However, the US dollar remained under pressure as dealers priced in expectations for at least a half-percentage-point interest rate cut by the Federal Reserve at its next regular policy meeting in late January to stimulate the sagging economy.
5pm today 5pm yesterday:
NZ dlr/US dlr US76.86 US78.06
NZ dlr/Aust dlr A87.29c A88.12c
NZ dlr/euro 0.5246 0.5256
NZ dlr/yen 82.29 83.07
NZ dlr/stg 39.14 39.73p
NZ TWI 70.97 71.68
Australian dollar US88.05c US88.58c
Euro/US dollar 1.4655 1.4858
US dollar/yen 106.99 106.41
- NZPA
