The kiwi was little changed at 84.15 US cents at 8am in Wellington from 84.13 cents at 5pm yesterday.
The New Zealand dollar was the worst performing currency overnight, as investors switched to so-called 'safe haven' assets on concern China's government is reducing its support for banks, which could stymie growth in the world's second largest economy.
The kiwi dropped to 83.78 US cents at 8am in Wellington, from
84.58 cents at the 5pm market close yesterday, making it the worst performer overnight of currencies tracked by Reuters. The trade-weighted index fell to 77 from 77.59 yesterday.
Investors favoured so-called safe haven currencies such as the yen and the Swiss franc, and dumped the higher risk kiwi and Aussie after a spike in China's short-term money-market interest rates and reports that the Chinese government is clamping down on Chinese bank lending.
"There's a little bit of fear that you are going to see the Chinese government clamping down on the Chinese banks in terms of their lending and hence squeezing the banks on the default front and also the property market within China," said Stuart Ive, senior client advisor, foreign exchange and derivatives, at OM Financial. "That saw risk get really hit yesterday, and the New Zealand dollar was the worst hit."
The People's Bank of China failed to inject cash for a second day yesterday amid regulators concern that loose liquidity might be fuelling risky credit expansion. China's biggest banks tripled the amount of bad loans written off in the first half, cleaning up their books ahead of what may be a fresh wave of defaults, Bloomberg News reported.
