The New Zealand dollar dropped to its lowest in almost 11 months after a US jobs report showed the world's largest economy is recovering, spurring demand for the greenback.
The kiwi slid to as low as 78.20 US cents, its weakest since July 25 last year. The local currency recently traded at 78.37 cents, down from 78.85 cents on Friday in New York and 79.69 cents at 5pm Friday in Wellington. The trade-weighted index slipped to 73.44 from 74.25 in Wellington on Friday.
The US currency gained against most of its peers after a report showed US employment growth was higher than expected last month, increasing speculation the Federal Reserve may start winding back its US$85 billion a month asset purchase programme which has weighed on the greenback.
"There is no real anti-New Zealand sentiment. We are caught along in the rush with everyone else," said Peter Cavanaugh, client advisor at Bancorp Treasury. "The US economy is definitely going in the right direction and at a reasonable pace. While the current forces are at play, then the New Zealand dollar will remain weak."
The US Labor Department report showed employers added 175,000 jobs in May and the unemployment rate rose to 7.6 per cent as the labour force expanded. The jobs growth is higher than the 170,000 new jobs expected in a Reuters survey of economists, and the 165,000 jobs predicted in a Bloomberg survey. The unemployment rate was expected to stay at 7.5 per cent.
With the next two-day Federal Open Market Committee meeting starting on June 18, the payrolls data is expected to provide direction for the committee's attitude toward tapering the bond-buying programme, known as quantitative easing
Also weighing on the local currency, reports from China, New Zealand's second-largest largest trading partner, showed signs of increasing weakness.
This past weekend a slew of reports showed Chinese industrial production rose a less-than-expected 9.2 per cent from a year earlier and factory-gate prices fell for a 15th month. Export gains were at a 10-month low and imports dropped after a crackdown on fake trade invoices while fixed-asset investment growth moderated and new yuan loans declined.
Those reports raised concerns about the slowdown in the world's second-largest economy which expanded 7.8 per cent in 2012, the slowest pace since 1999. The government set a 7.5 per cent growth target for 2013.
The New Zealand dollar dropped to 83.18 Australian cents from 83.87 cents at 5pm on Friday. The kiwi declined to 76.64 yen from 76.76 yen, slid to 59.40 euro cents from 60.08 cents and weakened to 50.49 British pence from 51.07 pence.