Dollar keeps on heading south

The dollar continued its fall yesterday, breaching the US63c mark and surprising dealers with the speed of its retreat.

The kiwi closed locally at US62.99c having plumbed a low of US62.80c on what ANZ senior dealer Mark Elliott said was "relentless selling" earlier in the session.

Having swung around the US70c mark for longer than many expected in the latter half of last year, the kiwi's long awaited descent this year has been swift. It is now trading 9.75 per cent below this year's mid-January high of US69.80c and 15.6 per cent below its 23-year post float high of US74.65c a year ago.

Dealers say the prospect of lower local interest rates and rising offshore rates made the kiwi a less attractive investment. That has seen carry trades, where low interest currencies are borrowed to invest in higher interest kiwi dollar investments, fall from favour, removing support for the kiwi.

"Everybody's heading for the door, everyone wants to get out. It was always going to happen," said Elliott.

The market is expecting economic data out later this week including current account and GDP to be an extension of the gloomy numbers seen recently. However, Elliott suspected the market "may be factoring in too much bearishness and we may get that old sell the rumour buy the fact".

Nevertheless, the kiwi's fall was unexpectedly fast. "This move's going to take us to down to a US59c to US60c window which I thought we'd see in a matter of months but maybe it's going to come up quicker than we originally thought."