Kiwi dollar tumbles as US confidence slides

The New Zealand dollar has tumbled amid renewed concerns the global recovery may take longer than previously thought after stocks on Wall Street sank and US data raised question marks about the strength of the world's largest economy.

The kiwi slumped 1.8 per cent as stocks in the US tumbled on concerns about American lenders as the US Securities and Exchange Commission nears settling with financial institutions, including Bank of America and UBS, after a three-year investigation into the manipulation of municipal bond market, according to the Wall Street Journal.

The Dow Jones Industrial Average dropped 2.5 per cent after data showed consumer spending in the US declined in September and sentiment edged lower.

"There's an underlying sentiment that investors are quite nervous at toppy levels of risk and it only takes a little thing to precipitate a decent fall," said Imre Speizer, market strategist at Westpac Bank "The kiwi has really underperformed for the last couple of days against most currencies.

The New Zealand dollar slumped to 71.61 US cents from 72.90 cents last week, and declined to 64.61 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 65.48. It sank to 64.38 yen from 66.32 yen last week and dropped to 79.60 Australian cents from 79.70 cents. It decreased to 48.64 euro cents from 49.16 cents and fell to 43.56 pence from 44.05 pence.

Speizer said the currency may trade between 70.80 US cents and 72.50 cents today, and if it has another couple of "down days" could begin new trend lower.

Weaker appetites for higher-yielding, or riskier, assets, has underpinned strength in so-called safe haven currencies such as the US dollar and yen. The Dollar Index, a measure of the greenback against six trading partners, gained 0.6 per cent to 76.39.

Australia's central bank Governor Glenn Stevens will review the country's benchmark interest rates tomorrow, and is expected to continue hiking rates. Australia became the first G-20 nation to begin tightening monetary policy last month after it dodged recession and reined in rising unemployment.

-BUSINESSWIRE