KEY POINTS:
Much worse than anticipated retail sales figures out today sent the kiwi scurrying sharply lower.
The New Zealand dollar dropped more than one US cent but it also fell heavily against all other major currencies, with the trade-weighted index down 1.4 per cent.
Although the sharemarket opened firmer, concerns about a global credit crunch remained strong and central banks around the world were busy pumping money into banking systems to ease liquidity.
The kiwi closed on US73.20c against US74.35c at the same time yesterday.
It has now lost over 10 per cent of its value since hitting a post-float peak of US81.6c a month ago.
Against the Australian dollar, it ended on A87.24c from A87.77c yesterday, while against the yen it ended on 86.33 from 87.93.
The trade-weighted index closed on 70.51 from 71.33.
Retail sales in the June quarter fell 0.6 per cent, whereas economist had forecast no change on average.
The economists then said it was too early for the Reserve Bank to change its view on inflation and to start thinking of rate cuts.
"While retail sales have peaked - a welcome development for a too-hot economy - today's outcome is not a green light to price in RBNZ easing," Citigroup economist Annette Beacher said.
"The RBNZ is highly unlikely to revisit 2003 when `over-easing' led to a subsequent housing boom that could only just now be tamed...so why would the RBNZ entertain easing anytime soon?"
However, forex traders started selling the kiwi the moment the news hit screens and selling didn't abate.
They figured that with the economy in retreat, the prospect of another rate rise was now minimal and the carry-trade flow that has underpinned the kiwi dollar's rise was unlikely to resume.
ANZ bank said there was no doubt Asia was in "liquidation mode" and any rallies by the NZ dollar were selling opportunities.
Meanwhile, Finance Minister Michael Cullen said the jitters in financial markets had helped New Zealand by encouraging traders to sell the inflated kiwi.
"From New Zealand's perspective it is not unhelpful in taking some of the heat again out of the New Zealand dollar because of the flow on effects," Dr Cullen said.
He said there was little cause to panic: "I think there was, to some extent, a bit of an exaggeration around the seriousness of what is occurring."
Traders do not expect higher-yielding currencies like the kiwi to rebound for the time being.
"Market players find it difficult to do carry trades now as market volatility remains high," said a trader at a Japanese trust bank.
In major currency trading, the euro weakened on doubts an expected rate rise next month would be carried out.
The European Central Bank injected 47.67 billion euros ($89 billion) into euro-zone money markets in a one-day tender to replace Friday's special three-day tender for 61.05 billion euros.
But the ECB's action to stave off a money market squeeze has led investors to question the chances of the ECB raising interest rates to 4.25 per cent next month from the current 4 per cent.
Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US73.208c US74.35c
NZ dlr/Aust dlr A87.24c A87.77c
NZ dlr/euro 0.5378 0.5427
NZ dlr/yen 86.33 87.93
NZ dlr/stg 36.40p 36.74p
NZ TWI 70.514 71.33
Australian dollar US83.92c US84.75c
Euro/US dollar 1.3616 1.3700
US dollar/yen 118.89 118.27
- NZPA