The New Zealand dollar fell below US67c today mainly as a result of euro weakness.
Coincidentally, Finance Minister Michael Cullen tacitly acknowledged today he was bereft of "options" to crimp the currency's rise. In November, he claimed he had options to stem the kiwi.
The kiwi finished the session near its low at US66.87c compared with its US67.22c close yesterday.
"We seem to have lost the flavour of the month just for the moment," a Wellington dealer said.
He predicted the kiwi might struggle above US67.20c and may test US66.50c in overnight trading.
The downward pressure was exerted by European Central Bank (ECB) president Jean-Claude Trichet who made comments that spiked the US dollar higher overnight.
The kiwi and Australian dollar are moving in tandem with the euro.
The aussie weakened to US76.88c from US77.33c yesterday.
Dr Cullen has come under increasing pressure to reveal exactly what his options on the currency were.
He said: "Much as I might wish otherwise, there is nothing I can do to alleviate the perception of current sluggishness in the US economy".
He told the Wine Exporters Forum in Wellington the kiwi was no different to the Canadian, Australian or European currencies in its links to the greenback.
BNZ currency spokesman Phil Burns said he thought Dr Cullen's comment today was an attempt to remove him from the spotlight.
"It is an acknowledgement that maybe he was going down the wrong path last time and this is a more appropriate path when commenting on the kiwi," Mr Burns told NZPA today.
BNZ currency strategist Sue Trinh said Mr Trichet's comments that inflation in the euro zone was below the 2 per cent target zone were designed to undermine the euro.
"That prompted speculation that the ECB will ease rates next week, putting a bit of pressure on the euro and giving the US dollar a lift."
While European officials were commenting ahead of the Group of Seven meeting in Florida on February 7, they were concerned with volatile moves in the euro, Ms Trinh said.
"Certainly, I think, they'd be mildly happy with this recent session of consolidation," she said.
At 5pm, the euro was at US$1.2464 (US$1.2575), while greenback was buying 106.07 yen (106.23).
The New Zealand dollar was mixed on the crosses. At the close, it was buying A86.92c (A86.92c), 0.5365 euro (0.5345), 70.99 yen (71.42), 36.86 British pence (36.82), and 0.8407 Swiss francs (0.8355).
On a trade weighted basis, the New Zealand dollar was at 66.21 (66.36).
The monetary conditions index was at plus 589 (585), and 90-day bank bills were unchanged at 5.74 per cent.
On the debt market, bond yields rose sharply in expectation the Reserve Bank on Thursday may lift interest rates and promise higher rates yet later this year. February 2006 bond yields were at 5.54 per cent (5.45), July 2009 bonds were at 5.82 per cent (5.71), and April 2013 bonds were at 5.98 per cent (5.86).
- NZPA
<i>Currency:</i> Kiwi falls under US67c as Cullen caves on options
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