The New Zealand dollar drifted to an easier close yesterday amid talk of its striking fresh all-time lows if the euro continues to weaken.
The kiwi finished at 40.35USc from 40.69c on Thursday, in subdued trade as Northern Hemisphere holidays get under way.
The Australian dollar also fell, weighing on the kiwi as it tailed the euro. It closed at 51.38USc.
The euro ended locally after breaking seven-month lows down more than three-quarters of a cent at 83.65USc (84.44c). It weakened as players continued to punish the currencies of central banks which have failed to cut interest rates, putting inflation worries over growth fears.
Overnight, the central banks of Europe and Britain left rates unchanged, and all eyes are watching the European Central Bank for intervention in the euro.
Greenwich Financial Services' director Derek Rankin said if the euro started setting new record lows then the kiwi could too. The euro hit rock bottom on October 26 last year at 82.30USc, and collateral damage from that was partly responsible for the kiwi's historic 38.97USc low.
Mr Rankin said if the kiwi broke 39.90USc that would trigger stop-loss selling, with the next stop around 39.30-50c.
"It's not the domestic economy driving the currency, it's the international economy," Mr Rankin said.
"We don't have a positive outlook on the NZ dollar. All our expectations of a weaker currency are being confirmed."
He noted that over the past 10 years the kiwi on average moved 14 per cent from high to low. "We've already done that."
Mr Rankin said exporters already had cover and importers did not want any at these levels.
Also weighing against the kiwi's fortunes for the rest of the year was the fact that the export season was ending and importer demand would pressure the currency.
- NZPA
<i>Currency:</i> Fading euro haunts kiwi
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