NZ dollar tumbles vs euro as Draghi talks up European economic outlook

The kiwi dollar fell to 63.72 euro cents as at 8am in Wellington.

The New Zealand dollar dropped to a two-week low against the euro after European Central Bank president Mario Draghi talked up the prospects for Europe's economic recovery and signs that inflation is stirring.

The kiwi fell to 64.10 euro cents as at 8am in Wellington from 65.25 cents late yesterday. The local currency slipped to 72.72 US cents from 73 cents.

Draghi said at the ECB's annual policy forum in Portugal that "all the signs now point to a strengthening and broadening recovery in the euro area."

He added that deflationary forces "have been replaced by reflationary ones" and the ECB will be able to adjust policy to keep pace - a signal that the end may be in sight for the central bank's prolonged period of extraordinarily stimulatory monetary policy.

"European currencies have surged, led by EUR on hawkish comments by ECB president Draghi, while the NZD has underperformed," said Jason Wong, currency strategist at Bank of New Zealand, in a note. "Draghi offered an upbeat assessment of the euro area economic recovery and signalled an eventual removal of policy accommodation."

The kiwi didn't move much after a speech by Federal Reserve chair Janet Yellen in London offered few fresh insights into the track for US interest rates, reiterating the need for "gradual" rate hikes.

The kiwi dropped to 56.64 British pence from 57.35 pence after the Bank of England tightened credit controls. The trade-weighted index fell to 78.19 from 78.70.

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The local currency slipped to 95.78 Australian cents from 96.07 cents late yesterday and traded at 81.60 yen from 81.63 yen. The kiwi fell to 4.9481 yuan from 4.9956 yuan.