KEY POINTS:
The New Zealand dollar fell below US68c for the first time since late November.
It closed at 5pm on US67.87c compared to US68.41c at Monday's close, before the Waitangi Day holiday.
The Kiwi has slipped more than 2 cents in the past few weeks, having been around US70.30c in late-January when Reserve Bank Governor Alan Bollard left official interest rates unchanged.
The fall is despite labour cost data on Monday suggesting Dr Bollard is more likely to lift interest rates at his next review next month.
BNZ currency strategist Danica Hampton said the New Zealand dollar was weighed down by trimming of kiwi/yen positions ahead of a G7 meeting at the weekend.
The market had become nervous about yen-funded carry trades, worrying the G7 may comment on the recent weakness of the yen, or the Bank of Japan's failing to tighten policy sufficiently to support the yen, she said.
In addition, the New Zealand dollar continued to be pressured by persistent and broad-based selling from a variety of model, momentum, and other leverage-type accounts.
"The days ahead promise to be more of a roller-coaster ride for the local currency," Ms Hampton said.
The kiwi was buying 81.60 yen today against 82.66 at 5pm on Monday. It weakened against other major currencies as well.
It was down to A87.44c from A88.45c on Monday evening, and to 0.5230 euro from 0.5288. The trade weighted index dropped to 67.48 from 68.21.
In the major currencies, the yen slipped against the US dollar after US treasury secretary Henry Paulson said the yen's value was set by market fundamentals, suggesting the US government did not see a weak yen as a problem.
The G7 meeting remains the focus in the market as European officials have been calling for debate on the weak yen, while US and Japanese officials have been playing down the issue.
A senior official at Japan's Finance Ministry said on Wednesday that the yen could be discussed at the G7 but that it was unlikely to be the main subject of the talks.
The Australian dollar drifted lower from a near two-week high against its US counterpart after the Reserve Bank of Australia kept interest rates steady at 6.25 per cent on Wednesday as widely expected. It closed on A87.44c, a cent lower than its local close on Monday.
Rates:
5pm today 5pm Monday
NZ dlr/US dlr US67.87c US68.41c
NZ dlr/Aust dlr A87.44c A88.45c
NZ dlr/euro 0.5230 0.5288
NZ dlr/yen 81.60 82.66
NZ dlr/stg 34.45p 34.82p
NZ TWI 67.48 68.21
Australian dollar US77.65c US77.35c
Euro/US dollar 1.2984 1.2939
US dollar/yen 120.17 120.83
- NZPA