NZ dollar slides to week low against greenback

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 fell to a week low as investors move out of emerging markets and new Reserve Bank restrictions on home lending limit the appeal of the local currency.

The kiwi fell as low as 79.50 US cents overnight and was at 79.87 cents at 8am in Wellington, unchanged from the 5pm market close yesterday. The trade-weighted index dropped to 74.97 from 75.21 yesterday.

The New Zealand dollar has shed 1.4 per cent this week as investors dump emerging market assets in anticipation of the Federal Reserve ending its money printing programme and after New Zealand's central bank said yesterday it would restrict low equity lending by trading banks from October to curb a house price bubble and limit the need for interest rate hikes.

"The kiwi has spent the overnight session licking its wounds following the big fall yesterday in the wake of the Reserve Bank announcement - it very much stands out as the underperformer amongst the major currencies," said Mike Jones, a currency strategist at Bank of New Zealand. "I suspect it will remain pretty heavy today with investors keeping a wary eye on the selloff in emerging market assets."

The New Zealand dollar may test 79.50 US cents today, he said.

BNZ's Jones said it was notable the kiwi didn't pick up even after a good dairy price auction overnight.

Prices of dairy products gained in the latest GlobalDairyTrade auction, with the GDT Price Index rising 2.3 per cent compared to the last sale two weeks ago, the fourth gain in five auctions.

Local data for release in New Zealand today, including migration, tourism and credit card spending are unlikely to influence the currency, Jones said.

"The bigger driver today will be whether the rout we have seen this week in emerging market assets continues and how Asian stocks trade with that general risk sentiment being the big driver of the kiwi on the day," Jones said. "A lot of cash that the Fed has been injecting into the US is being recycled through high risk emerging market assets and now that the Fed has signalled the end of that cheap and easy money, the cash is starting to be withdrawn from emerging markets, Asian emerging markets in particular."

Investors will likely be cautious ahead of the release of the minutes of the Federal Reserve Open Committee's last meeting, expected at 6am New Zealand time tomorrow, Jones said.

"It's going to be another lacklustre day for the kiwi."

The New Zealand dollar fell to 87.89 Australian cents at 8am in Wellington from 88.08 cents yesterday and slipped to 77.65 yen from 77.91 yen. The local currency declined to 59.51 euro cents from 59.83 cents yesterday and weakened to 50.95 British pence fr4om 51.04 pence.