Another ugly and worse-than-expected monthly trade deficit sent the New Zealand dollar spinning lower on all fronts today.
Instead of the expected $23 million surplus forecast by economists for May, a record deficit for that month at $104 million was posted. This was despite exports being at a record.
The kiwi dropped to US60.08 from its US60.60c opening, which was similar to yesterday's close.
There was similar damage against other currencies with the euro falling to a four-year low of 0.4780 from 0.4815 yesterday. Against the aussie, the kiwi fell to A82.04c and against sterling it dropped to a three-year low of 0.3295 from 0.3328.
The trade-weighted index was also at a three-year low of 60.87 compared to 61.43 yesterday.
ANZ Investment Bank said the kiwi had broken a key support level at US60.20c.
Decreasing consumer confidence and the release at the trade data had weighed heavily on the kiwi, ANZ said.
Meanwhile, the US dollar was hovering near a two-month high against the yen as market players waited to see whether the Federal Reserve would signal it will raise interest rates again after an expected increase this week.
The Fed starts a two-day meeting later in the session and is widely seen lifting overnight rates for a 17th straight time on Thursday to 5.25 per cent from 5 per cent. But the focus is on what the central bank signals about its next meeting in August.
At its last meeting in May, the Fed said some further policy tightening may yet be needed to stem inflationary pressures but such action would depend on the economic outlook.
Because some doubts have crept in about the Fed's inflation-fighting credibility, the central bank is likely to stick to the wording in the latest statement and there may not be much of a market reaction, some traders say.
- Reuters currency rates:
5pm today - 5pm Tuesday
NZ dlr/US dlr US60.08 - US60.65c
NZ dlr/Aust dlr A82.04c - A82.70c
NZ dlr/euro 0.4780 - 0.4815
NZ dlr/yen 69.80 - 70.45
NZ dlr/stg 0.3295 - 0.3328
NZ TWI 60.87 - 61.43
Australian dollar US73.23c - US73.38c
Euro/US dollar US1.2574 - US1.2418
US dollar/yen 116.18 - 116.16
- NZPA
<i>Currency:</i> Trade deficit knocks dollar down
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