NZ dollar falls on IMF news

The New Zealand dollar fell after the International Monetary fund slashed its growth forecast for the US economy, weighing on commodity prices and raising questions about the pace of global growth.

The IMF now predicts world's largest economy will expand at a rate of 2.8 per cent this year, down from an earlier estimate of 3 per cent, as rising long-term oil prices and the tepid jobs market weigh on the recovery.

The announcement comes ahead of a key inflation report this week, where rising food and energy prices will be in the spotlight.

The revised forecast saw oil futures tumble from near a 2 ½-year high, with ICE Brent Crude last trading at US$123.78, down from US$126.14 yesterday.

Oil is New Zealand's third biggest export. Global equities also fell, with the Standard & Poor's 500 index declining 0.3 per cent at 1,323.85, and Europe's Stoxx 600 closing 0.2 per cent lower at 280.99.

"The currency failed to break 78.50 US cents for a third time, and we're just off following the commodity baskets lower," said Tim Kelleher, head of institutional FX sales New Zealand at ASB Institutional. "We'll be keeping an eye on commodities, if they keep coming off the Aussie and kiwi currencies will follow."

The kiwi fell to 77.85 US cents from 78.38 cents yesterday, and dropped to 67.78 on the trade-weighted index of major trading partners' currencies from 68.09.

It was little changed at 74.10 Australian cents from 74.18 cents yesterday, and declined to 65.88 yen from 66.41 yen. It fell to 53.96 euro cents from 54.20 cents yesterday, and declined to 47.62 pence from 48 pence previously.

The kiwi dollar saw some selling pressure in the session after reports of a 6.6 magnitude aftershock in Japan, which briefly dented investor confidence and saw a spike in demand for safe-haven currencies such as the Japanese yen.

The kiwi dollar may trade in a range of between 77.65 US cents, and 78.10 cents, Kelleher said.