KEY POINTS:
The New Zealand dollar was buying about US76.40c this morning, having plunged on overseas markets on Saturday.
Meanwhile, the 10am opening of the sharemarket today was being nervously awaited after US stocks plummeted in last week's final session for the second day in a row.
The kiwi fell
from around US78c shortly before 1am on Saturday to the US76.40c level within a few hours.
It has fallen more than 4.5c since last Tuesday when it topped US81c for the first time since being floated 22 years ago.
The kiwi was already falling when it received a big push down on Thursday as the Reserve Bank raised the official cash rate for the fourth time this year, to 8.25 per cent, but said it was unlikely to raise them further.
Saturday morning's NZ dollar plunge came as the US dollar rebounded sharply, after a fall in the previous session, as trouble in the US credit markets led investors to repatriate funds from overseas.
Worries about ongoing problems in the US subprime mortgage and corporate bond markets have led investors to shun bets in riskier assets such as foreign stocks, helping buoy the greenback as money flows back into the United States.
At the same time a so-called flight from risk has led some traders to cut their exposure to carry trades, or purchases of high yielding currencies such as the New Zealand dollar, financed by selling low-interest rate currencies like the yen or Swiss franc.
On the sharemarket, US stocks ended last week with a sharp fall for the second session in a row.
The first of the falls, in Thursday trade in the US, had been followed by a 2.1 per cent fall on the New Zealand sharemarket on Friday.
The fallout from the drop in the final US session of last week will be known once the local sharemarket opens at 10am today.
US stocks plummeted for a second day on Friday (local time) as investors continued to recoil over credit concerns reverberating through financial markets around the world.
Worries over a possible credit crunch overwhelmed data from the US government showing second-quarter US growth that was the strongest in over a year.
In a scramble for safety, investors put money into the safe haven of US government bonds.
Driving this reallocation are fears that the housing market's troubles, including the subprime mortgage sector crisis, may be turning into a broader credit crunch.
Credit conditions have tightened drastically in recent days as investors shy away from riskier assets, including high-yield junk bonds.
- NZPA
