KEY POINTS:
The New Zealand dollar had a hairy morning's trading but settled down in the afternoon, demonstrating some composure in the wake of white knuckle ride down last week.
Dealers are loath to call the currency's future direction because it is so dependant on what happens in global markets.
They set wide ranges and generally sounded shattered.
The New Zealand dollar fell to US75.61c in morning trading from the US76.21c open and US78.33c close on Friday. It has plunged from US81c last Tuesday, a post-float record.
"We gave up almost another cent then mid-morning we had building consent figures, which were above market forecasts. That pushed us back above US76c and that's basically where we've sat," said Murray Hindley, ANZ's chief foreign exchange dealer.
Trading was thin in the morning and most of the selling was from people who follow technical charts.
He said the currency was in "free-fall mode" before it recovered.
Trading is expected to remain extremely volatile as investors around the globe assess their portfolios.
The Reserve Bank's statement last week that its interest rate hike was likely to be the last caught the attention of investors already spooked by volatile moves in US financial markets.
From Thursday night (NZT) on there has been an unwinding of carry trades - purchases of high yielding currencies such as the NZ dollar, financed by selling low-interest rate currencies like the yen or Swiss franc.
That came among worries about ongoing problems in the US subprime mortgage and corporate bond markets.
As a result investors were shunning bets in riskier assets, helping buoy the greenback as money flows back into the United States.
The kiwi has been falling across the board, getting to its lowest level against the yen since early June.
At 5pm today it was buying 90.20 yen, from 93.13 at 5pm on Friday, having fallen from a peak around 97.80 earlier last week.
The fall against the Australian dollar was less dramatic, with the kiwi buying A89.60c at 5pm today from A89.71c at 5pm on Friday.
The kiwi was above A91.60c last Tuesday and did get below A89.30c early on Saturday, its lowest level against the aussie since mid-June.
Against the euro, the NZ dollar was down to 0.5580 at 5pm today from 0.5701 at 5pm on Friday.
The trade weighted index was 73.16 at 5pm today from 74.72 at 5pm on Friday.
The ANZ bank said today that an increase in risk aversion was weighing heavily on both the NZ and Australian dollars.
The key question was how entrenched that theme would become.
"Further weakness in equities will continue to see investors pull money out of riskier assets and this includes currencies," ANZ said.
"In such an environment, the NZD will continue to remain under pressure as yield advantage takes a back seat."
Reuters currency rates:
5pm today 5pm Friday
NZ dlr/US dlr US76.12c US78.33c
NZ dlr/Aust dlr A89.60c A89.71c
NZ dlr/euro 0.5580 0.5701
NZ dlr/yen 90.20 93.13
NZ dlr/stg 37.62p 38.29p
NZ TWI 73.16 74.72
Australian dollar US84.92c US87.15c
Euro/US dollar 1.3638 1.3741
US dollar/yen 118.53 118.98
- NZPA