The New Zealand dollar was suffering as liquidity dried up ahead of two market holidays offshore during the week.
"Kiwi continued to trade lower and overall looks a bit heavy. It's obviously at the bottom end of ranges we've seen of late, so a break of US41.10c would open up the kiwi towards US40.80c," a local dealer said.
At 5pm the kiwi sank to US41.25c from Tuesday's close of US41.49c, and the aussie had dropped to US51.75c from US52.05c Tuesday.
"Overall the kiwi looks a bit heavy but we've got Thanksgiving coming (in the US) on Thursday, so bear in mind that things will probably start to quieten down in the markets generally," he said.
In world markets overnight, the US dollar fell as investors took profits from a week-long advance while the euro was bolstered by confirmation that China raised the proportion of euros in its $US200 billion foreign exchange reserve.
With trading looking set to become even less liquid ahead of US Thanksgiving on Thursday and a Japanese national holiday on Friday, the market was full of rumours such as the Taliban had surrendered and Osama bin Laden had been captured, dealers said.
Although dealers were highly sceptical, they said the rumours helped the dollar reach as high as 122.88 yen from its offshore low of 122.52 yen.
Against the Australian dollar at 5pm the kiwi was steady at A79.72c, while the aussie was buying $NZ1.2545 ($NZ1.2545).
The euro closed locally at US88.19c from US87.95 late Tuesday, while the greenback was buying 122.91 yen (123.12).
On the other crosses at 9am, the kiwi was trading at 0.4679 euros (0.4719 at Tuesday's close), 50.73 yen (51.09), 29.08 pence (29.32), 0.9149 marks (0.9229), and 0.6817 Swiss francs (0.6868).
The trade-weighted index was at 49.32 (49.64), the 90-day bank bills were at 4.87 per cent (4.86), and the monetary conditions index was at minus 945 (minus 914).
On the debt market, the March 2002 bonds were at 4.76 per cent (4.77), the April 2004s were at 5.43 per cent (5.31), the November 2006s were at 6.00 per cent (5.90), and the November 2011s were at 6.51 per cent (6.41).
- NZPA
<i>Currency:</i> Kiwi languishes ahead of Thanksgiving holiday in US
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