The New Zealand dollar was the weakest performer of major currencies overnight, after comments by Finance Minister Bill English that the kiwi may be 20 per cent overvalued added to its downward momentum.
The kiwi fell to 83.02 US cents at 8am in Wellington, from 83.46 cents at 5pm yesterday, and was the weakest performing currency overnight according to Reuters calculations. The trade-weighted index weakened to 77.83 from 78.26 yesterday.
The New Zealand dollar declined after the Reserve Bank of Australia yesterday published the minutes from its last meeting, signalling it was not going to try to push the Aussie down any lower, luring in speculative investors who bet it will appreciate. That dampened demand for the kiwi which was hit further after interest.co.nz quoted English saying that the local currency is overvalued.
"The move had already started after the RBA minutes yesterday from Australia and we saw kiwi/Aussie selling coming in to the market," said Stuart Ive, senior advisor at OMF.
"It's a combination of things, the move was triggered by the RBA in a quiet period because of the US holiday yesterday but the momentum overnight has been followed through. The kiwi has been fairly loveless."
The New Zealand dollar's failure to break through 84 US cents had triggered selling from investors who wanted to take profits, Ive said.
"We have seen profit taking coming in on the kiwi's failure to move any higher," he said. The currency had buying support at around 83 US cents, he said.
"We may just tread water now around these levels until we get clearer direction," Ive said. "I don't think we are going to run away to the downside."
Traders are awaiting tomorrow morning's release of the Federal Reserve's minutes from its last meeting and the latest HSBC China preliminary manufacturing PMI for February later that day.
A 1.2 per cent drop in dairy product prices in the latest GlobalDairyTrade auction this morning wasn't a bad result as prices remained elevated, Ive said.
The New Zealand dollar dropped to 91.89 Australian cents at 8am in Wellington from 92.08 cents at 5pm yesterday. The local currency slipped to 60.35 euro cents from 60.86 cents yesterday, weakened to 49.74 British pence from 49.88 pence and fell to 84.95 yen from 85.45 yen.