KEY POINTS:
The New Zealand dollar tumbled this morning as sharp declines in United States, European and Chinese manufacturing activity unnerved investors and pushed world stock markets lower.
The kiwi reached a two-month low against the Australian dollar, and sank to its lowest levels in around a week against the greenback and yen.
By 8am, the kiwi was buying US53.62c from US54.18c at 5pm yesterday, having dropped to around US53.20c at its lowest point early today.
Against the aussie, the NZ dollar fell to around A82.60c from A83.64c at yesterday's local close and by 8am had recovered some of the lost ground to A82.78c.
The kiwi also fell to around 49.70 yen from 51.62 at 5pm and by the local open was at 50 yen.
Against the euro, the NZ dollar was down to 0.4234 by the local open from 0.4278. The trade weighted index was 54.48 at 8am from 55.12 at 5pm.
The US dollar and yen rallied, continuing the pattern of the past few months as investors reversed risky trades funded by cheap yen and greenback borrowings.
Investors have also sought US dollars as they pinned their hopes on a substantial economic stimulus package from the incoming administration under President-elect Barack Obama.
The yen performed best against currencies of countries where central banks are expected to slash interest rates later this week, including the euro, sterling, and Australian and NZ dollars.
"The (US) dollar is still trading off bad economic news, risk aversion, and repatriation flows," said Michael Woolfolk, senior currency strategist, at Bank of New York Mellon in New York.
The Australian central bank will be announcing its interest rate decision later today, with ANZ bank referring to the decision as the "moment of truth".
ANZ said there was increasing belief in offshore markets that the central bank decisions throughout this week would mirror economic reality.
That had enabled the NZ dollar to drop through support levels as selling pressures intensified.
- NZPA