A concerted verbal assault on the New Zealand dollar by Finance Minister Michael Cullen had the effect of dampening demand today.
Although local traders yesterday were sceptical of the effect of Dr Cullen's comments, the kiwi failed to recover overnight from losses yesterday morning.
By 5pm the kiwi was down to US65.61c from US65.87c at 5pm yesterday.
In a series of interviews in Britain, Dr Cullen bad mouthed the currency.
"I think someone would have to be slightly strange to take a bet on the NZ dollar right now," Dr Cullen told the London-based Financial Times.
"Just how badly do we have to do on the current account before (investors) notice?"
Investors such as hedge funds who were rushing to buy assets in New Zealand dollars were being irrational and could face nasty losses when the economic cycle turned, he said.
The New Zealand dollar had risen nearly 10 per cent in the past three months as investors chased high interest rates, raising fears a recovery in New Zealand exports could be threatened.
Meanwhile, Reuters said an expected decline in New Zealand's interest rates coupled with a threat of a massive sell-out by Japanese mum and dad investors next year made a steep fall in the kiwi dollar look all but certain.
Analysts said the kiwi could fall as much as 15 per cent in 2007.
It had traded in a narrow band for the previous 24 hours since sliding around three-quarters of a cent when Dr Cullen's first comments on the currency were published.
ANZ bank today said attempts to get the NZ dollar back above US66c were thwarted as sales continued offshore on any rally.
But the bank also expects downside moves to be tentative at best as markets digested events of the past month and began to look forward to October.
The kiwi lost half a cent against the Australian dollar, ending on A87.38 from A87.87 yesterday. The trade-weighted index fell to 65.94 from 66.18. The US dollar steadied against the yen, clinging to the previous session's gains as traders look to upcoming data to gauge whether the Federal Reserve's next move will be to cut interest rates.
The US dollar has gained buoyancy this week, helped by upbeat data that provided reassurance about the outlook for the US economy, analysts said.
The euro edged up to US$1.2716 from around US$1.2700 in late New York.
Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US65.61c US65.87c
NZ dlr/Aust dlr A87.38c A87.87c
NZ dlr/euro 0.5158 0.5190
NZ dlr/yen 77.06 77.14
NZ dlr/stg 34.73p 34.76p
NZ TWI 65.94 66.18
Australian dollar US75.07c US75.07c
Euro/US dollar 1.2719 1.2696
US dollar/yen 117.47 117.11
- NZPA
<i>Currency:</i> Cullen comments douse NZ dollar's flame
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