The New Zealand dollar has fallen to multi-year lows against a broad range of currencies.
The Kiwi has fallen about 1% in the past day to a seven-month low against a stronger US dollar, at just below 56 US cents.
It also returned to a near 13-year low against the Australian currency, and was at 13-year lows against the British pound and the Chinese yuan.
The trade-weighted Kiwi, based on the value of a basket of currencies of New Zealand’s main trading partners, was touching a five-year low.
ANZ currency strategists said there was a wide range of factors buffeting global currency markets.
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“With Bitcoin struggling and risk appetite on the back foot, the consequences for the Kiwi and Aussie were severe,” they said in a market note.
The US dollar was broadly stronger with falling expectations of a further interest rate cut by the Federal Reserve, and a move by investors for the safe haven of the greenback.
“We’re heading into very important releases in the US, so naturally there’s a bit of wait-and-see momentum, although the momentum seems to be in favour of the dollar,” said Francesco Pesole, FX strategist at ING.
Another factor making investors wary has been the decline in the Japanese yen since the new Prime Minister Takaichi took office amid talk of a major stimulus package.
“The currency has been on a weakening trend since Takaichi won the LDP leadership vote early October and at some point the MoF [Ministry of Finance] will be forced into some currency intervention to stem the rout,” BNZ senior markets strategist Jason Wong said.
The Kiwi’s attraction has also been reduced by the weak state of the economy, the softening in dairy prices, and the likelihood of another Reserve Bank cash rate cut next week.
The New Zealand dollar is one of the most traded currencies in investment markets because it is freely tradable and its level is not regulated or set by authorities, but is prone to being sold off when investors are nervous.
A weaker Kiwi usually means better export returns but also makes imports more expensive.
By Gyles Beckford of rnz.co.nz
