The New Zealand dollar fell to a 12-month low as the Federal Reserve's signal of an end to quantitative easing, weak Chinese manufacturing and tighter credit sapped risk appetite and sent investors rushing to the greenback.
The kiwi fell to 77.48 US cents, and earlier dropped to a 12-month low of 77.10 cents, from 78.54 cents yesterday. The trade-weighted index fell to 72.95 from 73.74.
The US Dollar Index rose to as high as 82.15, a two-week high, as equity markets across the globe tumbled and commodity prices fell. Fed chairman Ben Bernanke said yesterday that the bank's US$85 billion a month of bond buying will start to wind down this year and be completed in 2014. Meantime, unofficial Chinese manufacturing data showed a sector in contraction and interbank lending rates jumped on signs its central bank was tightening credit.
"We've seen a continuation of the US dollar move," said Sam Tuck, senior FX manager at ANZ New Zealand. The reaction increased "as Europe woke up and digested the FOMC and weaker Chinese PMI" and news the People's Bank of China "wanted to make it tough" on lenders.
Tuck said the New Zealand dollar could fall below 75 US cents "very easily."