The New Zealand dollar lost its zip yesterday after its key trading partner, the euro, failed to hit parity with the US dollar.
By 5pm the kiwi had softened to US48.68c from US49.21c at Wednesday's close. The Australian dollar slid with the kiwi to US56.40c from US56.91c.
The euro ended the local session at US98.85c after coming within 31 basis points of reaching parity with the greenback overnight.
BNZ chief dealer Mike Symonds said the euro's failure to hit parity on its fourth attack in a week had caused a lot of speculative accounts to quit the euro and the Australasians.
Trade was light, with investors sticking to the sidelines after another horror night on Wall Street.
Major US stock gauges slammed to lows unseen since 1997 after Qwest Communications International Inc inflamed worries over corporate accounting and Standard & Poor's booted a handful of companies from its prestigious index.
"The focus is clearly still on US equities and their associated effect on the US dollar," BNZ currency strategist Stu Ritson said.
"Over the last few sessions US equities have come under a lot of pressure and that has pressured the US dollar."
He expected the kiwi to range between US48.50c and US48.90c overnight.
"We're just waiting for the next downleg in the US dollar which conversely will push the kiwi higher."
A major survey out yesterday showing a sharp fall in business confidence had no effect on the kiwi.
The New Zealand Institute of Economic Research's (NZIER) June Quarter Survey of Business Opinion (QSBO) found a net 2 per cent of firms expect a deterioration in general conditions compared with a net 23 percent who expected an improvement in the March quarter survey.
NZIER said the fall was partly seasonal. Removing seasonal variations, a net 9 per cent expect conditions to improve, which is a better result than the March quarter survey showing a net 3 per cent were positive.
Mr Ritson said the survey was positive for the kiwi as it meant more interest rate hikes were on the cards.
"It probably supports the Reserve Bank's decision to raise rates. It was a fairly firm result. It suggests that the yield differential that has been supporting the kiwi over the last few months is going to be maintained for the foreseeable future."
On the crosses the kiwi weakened across the board. At 5pm it was buying A86.32c (A86.53c at Wednesday's close), 57.29 yen (58.13), 31.44 pence (31.82), 0.7237 Swiss francs (0.7318) and 0.4924 euro (0.4968).
Against the kiwi, the aussie was buying $NZ1.1584 ($NZ1.1557).
On the money market, 90-day bills were at 6.04 per cent (6.05), the trade-weighted index was at 55.13 (55.68) and the monetary conditions index eased to minus 272 (minus 222).
On the debt market, the April 2004 bonds were at 5.83 per cent (5.91), the November 2006 bonds were at 6.26 per cent (6.28), and the November 2011 bonds were at 6.51 per cent (6.62).
- NZPA
<i>Currency:</i> Kiwi softens after Euro fails to reach parity
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