By ELLEN READ markets writer
The New Zealand dollar, a contender for the title of best-performing currency earlier this year, is now not even in the top 10.
The kiwi started the year at 41.48USc and hit 50.10USc on June 24 (a rise of 20.8 per cent). Yesterday it was trading around 45.47USc, having halved its gains to be up 8.6 per cent for the year to date.
The kiwi has fallen from grace this week as concerns about the outlook for the US economy make investors more averse to taking risks.
As more weak data emerges from the US - overnight on Monday, the US services sector reported lower growth - talk increases in the market that the US Federal Reserve may ease its benchmark interest rate from its present 1.75 per cent when it meets on August 13.
The kiwi's woes have been added to by a weakening Australian dollar, which has slid to a five-month low of around 52.75USc as overseas investors bail out.
The local currency has slipped below the 46USc key support level to around 45.5USc, making it the fifth worst-performing currency in the world in the past month.
"Eurokiwi issuance has almost dried up, while foreign buy-in to New Zealand's fixed income market has stalled and begun to slide," said Westpac currency strategist Johnathan Bayley.
As world markets became increasingly pessimistic about global growth and started to anticipate rate cuts, the New Zealand dollar's medium-term outlook had become more uncertain, he said.
"In the near term, however, there is a clear risk of a further reduction in [kiwi] assets by offshore investors," Bayley said.
Despite this blip, he is confident the kiwi will hit 50USc again by the end of the year.
Tony Alexander, chief economist with BNZ, said the continuing stream of negative data coming out of the US was keeping the kiwi pinned down.
"As long as US growth prospects look bad we are going to see the NZ dollar look weakish. Once that view turns positive we expect a move back toward 50USc."
Sluggish kiwi out of top 10
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