KEY POINTS:
After its high speed slide yesterday, the New Zealand dollar eased further overnight as investors continued to unwind trades in riskier high yielding currencies.
Latest figures this morning have the kiwi trading at US71.2c.
It sunk to a five-month low against the yen as the Japanese currency continued to gain on other major currencies.
At 8am today the NZ dollar was buying around 83.10 yen from about 84 yen at 5pm yesterday.
"Whenever people become risk averse, they tend to buy back the yen, because the yen has such low interest rates," said Jay Bryson, global economist at Wachovia Corporation.
After being smashed down more than 1-1/2 US cents yesterday in what currency traders said was a market meltdown, the NZ dollar's decline against the greenback overnight was less hectic.
From 6pm to 2am it was relatively stable, moving between US71.75c and US71.30c. The kiwi then strengthened for a while, spiking just above US72c around 5.45am before then heading down fast to be at a 4-1/2-month low around 71.2c at 8am today.
The NZ dollar hit a five-month low against the euro to be buying 0.5296 at 8am today from 0.5309 at 5pm yesterday.
Against the Australian dollar it troughed about 8pm around 86.30, a new low for the year. By 8am today the kiwi was at A86.78c, slightly up on the A86.65c yesterday evening. The trade weighted index was 69.04 this morning from 69.35.
The ANZ bank today said the NZ dollar's tumble was happening as an unwinding of carry trade positions continued, along with signs the economy was turning.
Despite plenty of local buyers, the NZ dollar had not found real support of note until it tested buying resolve around US71.20c, ANZ said.
With the kiwi having now corrected 12 per cent since the brief move above US81c three weeks ago, markets should step back and analyse fundamentals.
- NZPA