Kiwi dollar drops below US71c then rebounds

The New Zealand dollar dropped below US71c for the first time in about 1-1/2 weeks, but the dip was brief as the greenback weakened after a worse-than-expected jobs report in the United States.

The kiwi spent a few minutes down around US70.80c shortly after 1.30am on Saturday. It rebounded and two hours later briefly topped US72c, then fell away and by 8am today was buying US71.61c, ahead of its level of US71.20c at 5pm on Friday.

ANZ bank said the NZ dollar had a rocky end to the week as support levels were investigated on several occasions.

The poor US economic data highlighted the NZ dollar's vulnerability, while option expiries helped in the brief spike higher, ANZ said.

The Reuters news agency said the jobs report reinforced expectations US interest rates will stay near zero for some time.

US employers cut 263,000 jobs in September, far more than expected, while the unemployment rate rose to 9.8 per cent. The data raised fears the weak labour market could impede the economy's recovery from its worst recession in 70 years.

The prospect of prolonged low US interest rates has weighed heavily on the US dollar in recent weeks.

Speculation has grown the greenback is replacing the yen as the primary funding currency in carry trades, in which investors borrow in low-yielders to reinvest in assets with greater returns.

The NZ dollar briefly dropped to its lowest level against the Japanese currency since mid-September, near 63 yen. By the local open today the kiwi was at 64.29 yen, up from 63.59 yen at Friday's local close.

The kiwi was also up to 0.4913 euro at 8am from 0.4894 at 5pm on Friday and lifted to A82.65c against the Australian dollar from A81.84c. The trade weighted index was 65.36 at 8am today from 64.95 at 5pm on Friday.

- NZPA