The New Zealand dollar dived through the lower end of its recent trading range today when it followed a big move lower by the euro and was further weighed down by weak local data.
At 5pm in Wellington the kiwi was buying US70.77c from US71.18c at 8.30am this morning and US71.43c at 5pm last night, having traded in a US70.60c to US71.52c range during today's local session.
Westpac currency strategist Johnathan Bayley said it had been a big day on currency markets with the kiwi's move primarily driven by the euro-US dollar exchange rate.
A drop in the US-euro rate below US$1.245 which had looked possible for some time occurred today, and once it did triggered a flurry of "stop loss" selling of the euro by investors keen to abandon positions before they lost too much, speeding up its fall.
"That move reverberated across markets partly playing out as a US move and partly as a euro move," Mr Bayley said.
By 5pm today the euro was buying US$1.2391 from US$1.2539 at 5pm yesterday and the greenback strengthened against most currencies, closing at 108.25 yen (107.78 at 5pm yesterday).
Both the aussie and the kiwi were hit, with the aussie closing at US75.58c (US76.23c), but the kiwi's move was exacerbated by the surprisingly weak business confidence and building consents data out this morning which moved the market's expectations about interest rates.
"The market has gone today from pricing in a 36 per cent chance of a hike by July to pricing in more like a 10 per cent chance.
"The market is saying, 'we no longer believe the (Reserve Bank's) hawkish rhetoric, a hike simply cannot be justified given the data stream'."
Meanwhile, on its crosses today, the kiwi was buying 39.03 pence (39.14), 0.5711 euro (0.5697) A93.63c (A93.72c), 76.60 yen (76.98), and 0.8817 Swiss francs (0.8808).
The trade-weighted index was at 70.73 (70.99), while the monetary conditions index was at plus 1074 (1095).
On the money markets, 90-day bank bill yields were at 7.02 per cent (7.07), July 2009s were at 5.79 per cent (5.85), and April 2015s were at 5.67 per cent (5.75).
- NZPA
<EM>Currency:</EM> Kiwi dives on big US-Euro move and weak local data
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