The New Zealand dollar slumped well and truly below the psychological barrier of US60c today, touching lows not seen for over two years.
It closed the local session at US59.52c, having dropped to a low of US59.30c overnight. It had closed yesterday at US60.08c.
The US dollar was flexing its muscles against most currencies ahead of an expected hike in interest rates tomorrow.
However, the kiwi continued to display weakness and hit multi-year lows against other major currencies.
ANZ Investment Bank today described the kiwi dollar as "the ugly duckling" after yesterday's $104 million May trade deficit surprised markets that had anticipated a surplus.
ANZ said the market's reaction to a moderate deficit by historical standards indicated the market wanted to sell the New Zealand dollar on any excuse.
The bank said if the NZ dollar ended the month below the US59.70c chart point, it was headed for the next medium-term target of US56.20c.
Weakness of the kiwi against currencies of major trading partners -- the Australian dollar, yen and euro -- confirmed "all and sundry are quick to jump on any bad news story emanating from NZ", ANZ said.
Against the Australian dollar, the kiwi closed on A81.74c compared with A82.04c at yesterday's close.
The New Zealand trade-weighted index closed on a three-year low of 60.46 against 60.87 yesterday.
The Australian dollar also weakened -- US72.86c from US73.23c.
The US dollar was hovering near a two-month high against the yen as traders awaited the interest rate decision and what signals the Federal Reserve will send about further tightening in August.
The Fed concludes a two-day meeting later in the day and is widely seen lifting overnight rates for a 17th straight time to 5.25 per cent from 5 per cent.
"I think a 25 basis point rise seems to be a given but the bigger issue is what may happen after that," said a dealer at a European investment bank in Tokyo.
The key will be how the Fed plans to deal with concerns about inflation at a time when the US economy is showing signs of softness, traders and analysts said.
The market is keen to see if the Fed, in its post-meeting statement, tweaks the wording of the May statement that said further policy tightening may yet be needed to stem inflationary pressures but such action would depend on the economic outlook.
- Reuters currency rates:
5pm today - 5pm Wednesday
NZ dlr/US dlr US59.52c - US60.08
NZ dlr/Aust dlr A81.74c - A82.04c
NZ dlr/euro 0.4748 - 0.4780
NZ dlr/yen 69.36 - 69.80
NZ dlr/stg 0.3277 - 0.3295
NZ TWI 60.46 - 60.87
Australian dollar US72.86c - US73.23c
Euro/US dollar US1.2543 - US1.2574
US dollar/yen 116.51 - 116.18
- NZPA
<i>Currency:</i> Dollar slumps to 2-year low
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