The New Zealand dollar, through no fault of its own, could test its all-time low set in October at 38.95USc as the Australian dollar weakens.
"We touched a low today at 39.80c but it was short-lived. However, sentiment would suggest we're going to extend that low, maybe threatening the all-time low sub-39c," a currency dealer said.
The kiwi finished at 39.97c (40.35c on Friday).
"It opened at 40.30c, traded higher, and just sold off with the aussie. Then the kiwi found some downside momentum of its own courtesy of a few stop losses out of the States," the dealer said.
The unit traded briefly as high as 40.38c.
"I don't think it's going to be one-way traffic. I'm not 100 per cent confident that we will hit that all-time low this week. It depends on how the market reacts to the prospect of a Reserve Bank of Australia rate cut [tomorrow]."
The dealer said the Australian central bank could shave half a percentage point off its inflation-fighting interest rate, although the consensus at this stage seems to be for just a quarter point. The market could then sell on a reduced yield argument or buy on the idea the bank was reacting quickly enough to assist the struggling economy.
- NZPA
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