NZ dollar pushed lower by risk aversion

The New Zealand dollar trudged lower today as investors continued to turn away from perceived risky assets such as the kiwi and euro.

The euro slid to a three-week low against the yen, and hit a record low against the Swiss franc as ongoing concerns about European banks' funding abilities prompted investors to favour the safe-haven Swiss currency.

"For the most part, we're following global risk aversion on the day," said Westpac senior market strategist Imre Speizer.

"We had a small fall in US equities overnight and the after-hours equity futures continued to sell off.

"As well as that, the euro currency also sold off, so we've taken the lead from both those indicators and kiwi has fallen commensurately and it looks soggy as we speak and I dare say it'll fall a bit more tonight," Mr Speizer said.

A large fall in May building permits had also nudged the kiwi lower.

Over the last few months, the kiwi has become closely correlated with the S&P 500 equity index, instead of following the major currencies.

"If the world's investors are feeling gloomy, they will most express it most obviously through the S&P 500," he said.

By 5pm, the kiwi was at US70.30c, down from its opening level around US71c and also below its level late yesterday afternoon of US71.12c.

The kiwi was little changed against the aussie, at A81.17c from A81.20c at 5pm yesterday. It was a touch weaker against the euro, at 0.5731 from 0.5742 late yesterday.

The kiwi fell further against the yen and sterling, to 62.42 yen from 63.60 yen yesterday, and to 46.56 pence from 63.60 pence.

The trade weighted index fell to 67.50 from 68.05 yesterday.

The euro's weakness was partly due to a rise in the Swiss franc after a Swiss National Bank board member was quoted as saying deflationary risks had disappeared, and Swiss exports had proven to be robust despite a stronger currency.

European banks having to repay 442 billion euros to the European Central Bank this week for funds borrowed a year ago, leaving a potential liquidity shortfall, was also weighing on the euro.

- NZPA