The New Zealand dollar dipped to multi-month lows, then rebounded, as traders favoured the kiwi over the Aussie, on expectations Australia will be hit harder by a slowing Chinese economy and sluggish commodity prices.
The kiwi dropped to 63.79 US cents, its lowest since Sept. 30 last year, and was trading at 64.20 cents at 8am in Wellington, from 64.62 cents at the New York close and 64.32 cents on Friday. The trade-weighted index was at 71.10 from 71.07 on Friday.
The New Zealand dollar dropped along with other commodity-linked currencies early in the weekend as Iran looks to ramp up its oil exports following the lifting of sanctions, which is likely to add to the existing glut where supply outweighs demand and weighing on the price of oil.
Commodity currencies are also being hurt by continued concern about a slowdown in China's economy, although the kiwi rebounded as traders favoured the local currency over the Aussie, given Australia's economy is likely to dented by weaker exports of hard commodities to its largest market.
"Amidst the gloom, the New Zealand dollar held up pretty well," said Bank of New Zealand currency strategist Jason Wong. "One of the weakest currencies was the Australian dollar, no doubt given its strong links with China and falling oil and base metal prices."
The kiwi/Aussie cross rate is favoured by many offshore traders and the weekend's movements appeared to reflect people taking positions in the currency pair, Wong said.
The New Zealand dollar jumped to 93.74 Australian cents from 92.56 cents on Friday.
US markets are closed for the Martin Luther King Jr holiday today.
In New Zealand today, the Real Estate Institute is expected to release its latest monthly house price data for December.
The local currency fell to 58.70 euro cents from 59.10 cents on Friday, sank to 75.02 yen from 75.79 yen, and slid to 4.2269 yuan from 4.2366 yuan. It advanced to 45.02 British pence from 44.64 pence on Friday