The New Zealand dollar fell its lowest against the US currency in almost a month, as investors fled their commodity positions amid fears the fragile global economic recovery may be sputtering, denting demand for commodity linked currencies such as the kiwi.
Sentiment on global markets shifted further into risk-off mode
after a US Department of Labour report showed claims for unemployment benefits spiked by 43,000 to a seasonally adjusted 474,000 for the week ended April 30.
That rattled investors ahead of non-farm payroll data on Friday in the US, giving rise to fears that the world's biggest economy may be sliding backwards.
The Thompson Reuters Jefferies CRB index, a measure of 19 commodities, fell 4.9 per cent to 341.07, effectively wiping out six weeks of gains.
Oil prices plummeted, with ICE Brent Crude futures recently trading at US$109.29, down from US$121.60 yesterday.
Precious metals also came in for heavy selling, with gold dropping to US$1,469.24 an ounce, down from US$1,515.89 yesterday, its lowest level since.
"If the data is suggesting a genuine slowing in global growth momentum, then we could be in for further corrections in risk assets," said Alex Sinton, a senior dealer at ANZ New Zealand.
"All eyes will be on Asia today to see what they think with Japan coming back from holiday."
The Australian currency bore the brunt of commodity sell-off, with the Aussie dollar recently trading at US$1.0553, down from US$1.0725 yesterday, and well off post float highs of US$1.1011 seen at the start of the week.
Sentiment was further dented by the European Central Bank rates announcement, when bank president Jean-Claude Trichet kept interest rates on hold as expected, but toned down his rhetoric compared to previous more hawkish statements.
The euro recently traded at US$1.4527, down from US$1.4883 yesterday.
The kiwi dollar may trade between 78.25 US cents and 78.85 US cents, Sinton said.
