KEY POINTS:
The New Zealand dollar was hammered today but it was part of a global flight from risk.
The NZ dollar dropped to US65.90c mid-morning for the first time in 22 months but made it back to US66.60c by 5pm.
It was a big fall because the currency had been around US68.80c at 1am and closed yesterday at US68.17c.
The decline was all about risk aversion and liquidation of so-called carry traded, said Murray Hindley, ANZ Institutional Bank chief foreign exchange dealer.
He said once the euro broke key levels around the New York close it took everything else with it.
Bank of New Zealand currency strategist Danica Hampton said escalating concern about the health of the global economy and heavy losses in global equities were also a factor.
The greenback rallied overnight to its highest level against the euro this year after the ECB cut its growth outlook for the 15-nation region, boosting the likelihood of interest rate cuts.
In Asian trading today the yen soared to a 13-month high against the sliding euro.
Investors are again fleeing risky investments and one of them is the NZ dollar ahead of the Reserve Bank of New Zealand monetary policy statement next week.
All but one of the 17 economists in the Reuters poll expected the central bank to cut rates to 7.75 per cent on September 11. One predicted a 50 basis-point cut.
By 5pm today the NZ dollar was buying 0.4670 euro from 0.4705 at 5pm yesterday.
Against the Australian dollar it was at A81.70c from A81.85c yesterday.
Against the Japanese currency, the kiwi dropped to 71.09 yen by 5pm from 73.70 yesterday. The trade weighted index was 63.36 at 5pm down from 64.38 at 5pm.
- NZPA
