The New Zealand dollar sank to its lowest level this year against a resurgent greenback as the United States economy shows unexpected resilience while markets fret over European sovereign debt problems.
The kiwi briefly dipped below the US70c mark early yesterday, extending its losses late last week on equity market
weakness with concern about the sovereign debt positions of Greece and Portugal.
The kiwi's slide also reflected strength in the US dollar stemming from a better-than-expected fourth-quarter US GDP figure.
The kiwi clawed back its early losses yesterday on demand from Japanese investors but faded to close at US70.02c in Wellington. It was last below US70c on December 23.
Westpac markets strategist Imre Speizer and BNZ's Mike Jones said they were anticipating a test of support for the kiwi at the US69.75c level over coming days.
While Jones said BNZ believed the kiwi had sound fundamentals and would probably continue to trend up in the next few weeks beyond some short-term weakness, Speizer believed further strength in the US dollar was likely to keep the local unit under pressure for some time.
"The renaissance of the US dollar really is the key story in currency markets globally.
"We've been proponents of a significant rise in the US dollar this year for some time."
That outlook was primarily based on the view that growth in the US economy would outpace consensus forecasts.
"That is part of the reason for the recent gains and will be the major reason over the longer term, but the US dollar has retained some of its safe haven appeal as well."
That was a dramatic turnaround from the "fairly extreme" but widespread view during the fourth quarter of last year that the US dollar's days as the world's primary reserve currency were numbered.
Speizer expected further strength from the US dollar for some time to come, with other major currencies, - barring Japan's yen which also holds some "safe haven" status - coming under pressure as a result.
However the Australasian currencies were likely to fare better than most due to the "pretty good" fundamentals for the kiwi and "stunning" fundamentals for the aussie.
