A euro under pressure dragged down other currencies including the New Zealand dollar yesterday, ahead of tonight's European Central Bank interest rate meeting.
The kiwi traded between 56.68/93USc today, and could head lower overnight said one local dealer.
A fall in the euro triggered the kiwi's tumble below Wednesday's five-year highs, he said. At 5pm the kiwi was buying 56.73USc, well down from 57.29USc at Wednesday's local close, while the aussie was at 63.56USc, down from 64.31USc.
"The euro came off, so the kiwi and aussie and the rest came off, and the US dollar picked up. The market's short in US dollars and we've just seen a correction," he said.
Short positions mean the market expects the US dollar to continue falling.
Speculation continued that the ECB may reduce rates and erode the yield advantage enjoyed by the single currency. However, most analysts expect it to keep benchmark rates steady at 2.25 per cent.
The greenback recovered from 10-month lows against the yen in Tokyo after fears that authorities were ready to intervene to shore up the yen.
<I>Currency:</I> Euro fall triggers kiwi tumble
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