The New Zealand dollar fell to its lowest level since March 28 as global equity markets slumped on concern about how the European debt crisis is playing out.
The crisis is preoccupying investors but they are also waiting for an interest rate decision by the Reserve Bank of Australia due late afternoon New Zealand time.
The kiwi dropped to 75.66 US cents at 8am from 76.20 US cents at 5am. It had rallied from 75.81 US cents at 5pm yesterday.
"It is basically another move to safe havens. US Treasuries have been aggressively bought," said Alex Sinton, senior dealer at ANZ New Zealand.
The Dow Jones Industrial Index was down 205 points, or 1.9 per cent, at 8am New Zealand time. Equity markets around the world sank as officials in Europe considered Finland's demands for collateral to underpin bail-out loans and what to do about Greece after it missed a budget deficit reduction target for 2012.
The problems in Europe overshadowed news that US manufacturing unexpectedly accelerated in September, easing worries about a recovery in that economy.
Trading on markets in Asia is expected to be reduced by the Golden Week holiday in China this week.
A BusinessDesk survey of five strategists yesterday expected the New Zealand dollar to be weak this week after the double credit rating downgrade from Fitch Ratings and Standard & Poor's last week.
The RBA is expected to keep its target cash rate on hold at 4.75 per cent today. The New Zealand Institute of Economic Research's quarterly survey of business opinion today may be overshadowed by the RBA decision even though it is used by the Reserve Bank of New Zealand when setting monetary policy.
Investors will also be looking for guidance from European Central Bank President Jean Claude Trichet and Federal Reserve chairman Ben Bernanke when they speak on Tuesday.
The kiwi was lower at 67.98 at on the trade-weighted index from 68.05 yesterday, and fell to 78.85 Australian cents from 78.95 cents. It fell to 58.05 yen from 58.30 yen yesterday and rose to 57.20 euro cents from 56.87 euro cents yesterday. The kiwi dollar was little changed at 48.87 from 48.83 British pence yesterday.