The New Zealand dollar continued to fall during local trade today following Friday night's plunge through key technical levels thanks to a resurgent United States dollar.
The kiwi closed at US68.07c at 5pm in Wellington from US69.23c at the same time on Friday having recovered from a new eight-month low of US67.70c earlier during in the session. Its best level today was US68.51c.
The kiwi found a fresh patch of weakness on Friday night when the US dollar hit 13-month highs against the euro and 14-month highs versus the pound sterling on strong US factory data. The data cemented expectations for the Federal Reserve to keep raising interest rates.
"Certainly a big Friday night for the kiwi -- I guess more so for the US dollar," ANZ Investment Bank head of forex John Body said.
"Strong US data took away concerns of sloppy US growth for final two quarters of the year and assured the Fed will be on a pretty steady tightening cycle. Generally the yield currencies bore the brunt of that," he said.
One of the key factors in the kiwi's strength in the last couple of years has been our high interest rates relative to other countries, especially the US. That means comparatively more yield for investors who buy the kiwi and other high interest currencies.
"Technically the damage has been done -- confidence in the yield trade has been reduced quite a lot and the lack of a consistent bounce replicates the price action we saw in the euro when it started falling.
"We expect this to be part of a deeper correction in the kiwi down to a minimum of US65c."
The US market will be closed overnight for the July 4 holiday.
At 5pm in Wellington, the greenback was buying 111.55 yen (111.01 at 5pm on Friday), while the euro softened to US$1.1927 (US$1.2069) and the Australian dollar was weaker at US74.95c (US76.02c).
On its crosses this afternoon, the kiwi had weakened to A90.78c (A91.05c), 38.59 British pence (38.75), 0.5698 euro (0.5736), 0.8827 Swiss francs (0.8896) and 75.82 yen (76.84).
The TWI was at 69.21 (69.88) and the monetary conditions index was at plus 965 (1014).
On the money markets, 90-day bank bill yields were at 7.03 per cent (7.04), July 2009 bonds were at 5.91 per cent (5.86), and the April 2015s were at 5.78 per cent (5.71).
- NZPA
<EM>Currency:</EM> Kiwi at eight-month low
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