The New Zealand dollar fell below US41c today, tracking the declining Australian dollar which has slipped under the key US50c level.
At 5pm the kiwi traded at US40.97c, down from US41.79c at yesterday's close, while the aussie slumped to US49.62c from US51.34c yesterday.
The New Zealand dollar gained on the trans-Tasman cross but it struck out against other currencies, including the euro which is at its highest on the kiwi since January 1999.
Earl White of Bancorp Treasury Services said New Zealand would benefit if the kiwi held steady about US41c while the world economy tried to recover from the destruction in the United States.
Exporters could manage with the kiwi that low, particularly as the export season was largely over, while importers had struck a recent windfall with the kiwi up to US44.50c last month, Mr White said.
The main threat to the New Zealand dollar was its Australian counterpart, which the kiwi would continue track downwards albeit at a slower rate.
In fact, Mr White said, the kiwi was currently at levels it had traded at for some time before it began its recent six week rally. It would have fallen further after the bombings, possibly to about US39c, if it had not rallied.
US policymakers launched a full-scale offensive to protect their battered economy today and central banks around the world cut rates to help provide some bounce to the greenback.
The US Federal Reserve overnight slashed interest rates by a half percentage point to boost confidence and support growth following last week's terrorist attacks on US cities.
That move was matched by the European Central Bank in a coordinated effort to prevent the global economy from sliding into recession.
The greenback received a further cushioning as Treasury Secretary Paul O'Neill urged investors to "buy American" and the White House said it would consider fresh stimulus measures if needed.
Key US interest rates now stand at 3 percent, against New Zealand's 5.75 percent, while last night's cut took European interest rates to 3.75 percent from 4.25 percent. However investors remain unimpressed by the interest rate differential, driven by an aversion to risk and interested only in what they knew.
Australia's central bank held off on a rate cut but could still lower official rates in coming days, analysts said. The Reserve Bank of Australia could either move on Wednesday with its own contribution to underwrite confidence, or else would likely wait until the next policy meeting on October 2.
The market was picking the Reserve Bank of New Zealand to cut rates at its October 3 meeting.
On the sharemarket, Wall Street re-opened on Monday after its longest shut-down since the Great Depression, with a 7.1 percent fall in the Dow Jones industrial average to 8920.70.
On the crosses at 5pm, the kiwi rose during the day to trade at A82.55c (A81.45c at yesterday's close), but fell to 48.32 yen (49.37), 0.2798 pence (0.2833), 0.8703 marks (0.8818), 0.6605 Swiss francs (0.6751) and 0.4450 euros (0.4509).
The Australian dollar was buying around $NZ1.2113 ($NZ1.2285).
The trade-weighted index was at 48.39 (48.98), 90-day bill yields were at 5.66 percent (5.65 percent) and the monetary conditions index deteriorated to minus 960 (minus 901).
Among the bonds the March 2002s were at 5.41 percent (5.42 percent), the April 2004s were steady at 5.72 percent, the November 2006s were at 6.17 percent (6.13 percent), and the November 2011s were at 6.54 percent (6.48 percent).
- NZPA
<i>Currency:</i> Kiwi falls below US41c
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