The New Zealand dollar dropped by more than half a US cent as weaker than expected private payrolls figures in the US eroded investors' appetite for higher yielding assets. The kiwi may extend its decline after dairy prices sank in the latest auction GlobalDairyTrade auction.
The kiwi fell to 84.92 US cents from 85.73 cents at 5pm in Wellington yesterday. The trade-weighted index sank to 78 from 78.65.
Analysts pared back their expectations for official employment data in the US on Friday after ADP report showed private payrolls grew 119,000 in March, less than the 150,000 expected. Stocks on Wall Street fell with the Standard & Poor's 500 Index and Dow Jones Industrial Average both down 0.9 per cent, with traders less optimistic about US recovery. The Federal Open Market Committee did little to deter that opinion, keeping interest rates near zero per cent and its money printing programme unchanged.
"The kiwi and the Aussie stand out as suffering from what looks like a sharp pull back in speculative positions," said Mike Jones, currency strategist at Bank of New Zealand in Wellington.
"The trigger was the ADP news."
Trade-weighted prices across all products at Fonterra's GlobalDairyTrade auction dropped 7.3 per cent, with the average price for whole milk powder sinking 10 per cent.
"You tend to see a bigger reaction to dairy news during the Asian session, so you might see sellers on any bounce in the kiwi," Jones said.
The ANZ Commodity Price Index is scheduled for release today, and will likely show some consolidation in the prices of locally produced raw materials after its recent gains.
Jones said the local currency may trade between 84.70 US cents and 85.15 cents today.
Traders are awaiting the European Central Bank meeting on Thursday in Brussels, and are expecting the ECB to cut its benchmark rate a quarter-point to 0.5 per cent. The kiwi dropped to 64.38 euro cents from 65.11 cents yesterday.
The local currency sank to 54.57 British pence from 55.20 pence yesterday, and dropped to 82.63 yen from 83.37 yen. It edged down to 82.60 Australian cents from 82.69 cents yesterday.