KEY POINTS:
The New Zealand dollar joined the global sell-off today following US politicians' surprise vote against a US$700 billion ($1.03 trillion) finance industry bailout plan.
By 5pm, the kiwi was at US67.00c, having recovered from a session low of around US66.40c but well down from late yesterday's US68.58c.
However, it jumped sharply against the Australian dollar, rising to A85.81c from A82.57c late yesterday. But the NZ dollar lost ground against the euro, yen and sterling.
"Risk is off the table, and that's seen all the currencies sold off," said one dealer.
"Aussie's probably been more aggressively sold off, you could put that down to the drop in commodity prices, where the Aussie's a wee bit more exposed than we are to those hard commodities, and also the fact that the Aussie sharemarket's a bit more tied to the Dow than we are."
The US lawmakers' vote against the bailout package panicked investors and prompted the biggest one-day drop on record for the Dow Jones industrial average. Asian markets tumbled as well, with Japan's Nikkei average falling nearly 5 per cent, and New Zealand's top-50 index down more than 4 per cent for much of the day.
The kiwi did not react to good news from the National Bank's monthly business outlook, which turned positive for the first time in six years.
"The market's probably saying that that's yesterday's event, and today is what's happening in the US etc," the dealer said.
The US dollar fell to a four-month low against the yen as investors fled risky positions after the failure to pass the bank bailout plan, although it recovered as Japanese institutional investors bought dollars while they prepared to close their books for the April-September first half of the financial year.
But the euro and sterling also suffered as banks in Europe succumb to the widening crisis fallout, prompting investors to rush for currencies seen as a safe-haven during the turmoil, such as the yen and Swiss franc.
"The simple way to understand all the developments is that the yen is an alternative choice as safe-haven, with the euro and dollar shunned due to the credit crisis," said a senior trader at a Japanese trust bank.
Currency rates:
NZ dlr/US dlr US67.00c US68.58c
NZ dlr/Aust dlr A85.81c A82.57c
NZ dlr/euro 0.4667 0.4727
NZ dlr/yen 69.91 72.97
NZ dlr/stg 37.22p 37.50p
NZ TWI 63.50 64.51
Australian dollar US79.95c US83.01c
Euro/US dollar 1.4356 1.4502
US dollar/yen 104.34 106.46
- NZPA
