The New Zealand dollar is continuing to test six-month lows as equity markets again succumb to concerns about European sovereign debt even though local milk powder prices were better than some analysts expected at Fonterra's latest online auction.
The kiwi was at 74.90 US cents at 8am after falling to 74.80 US cents, its lowest level since March 24, in overnight trading. It remained below the 75.30 US cents at 5pm yesterday.
Prices for all products Fonterra auctioned fell 1.6 per cent, but Mike Burrowes, market strategist at Bank of New Zealand, said that "thanks to a collapsing New Zealand dollar", prices in New Zealand dollar terms rose 7.6 per cent overall.
"We were more in the camp that there may be a large decline in dairy prices in this auction, but that hasn't happened. We see the auction as a net positive," he said.
Still, the main driver of the currency market was developments in the European debt crisis, he said.