The New Zealand dollar dropped to a two-year low against the greenback in the aftershocks from yesterday's half a percentage point cut in official interest rates.
The Reserve Bank's decision to make a bigger than expected interest rate cut, down to 7.5 per cent, sent the kiwi slidinga cent to around US65.30c soon after the announcement at 9am yesterday.
Then yesterday afternoon and evening the NZ dollar slid further, bottoming around US64.35c shortly before 9pm before clawing its way back to US65.24c by 8am today.
Early today the NZ dollar got down to its lowest level in more than two years against the Japanese currency, around 68.50 yen, before moving up to 69.91 yen by today's local open.
The low-yielding yen benefited from a surge in risk aversion, which also pushed the euro and the Australian dollar down to their lowest in at least two years.
Against the euro, the NZ dollar reached a month low around 0.4625 overnight, before strengthening to 0.4676 euro.
The kiwi bounced around against the Australian dollar in a range between around A81.65c and A81.25c overnight, buying A81.45c at 8am. The trade weighted index was 62.66 at the local open, compared to 62.63 at 5pm yesterday.
The US dollar scaled a fresh one-year high versus the euro and a basket of currencies overnight, boosted by US investors repatriating overseas investments amid escalating worries about global growth.
But rising risk aversion, data showing an unexpectedly large US trade deficit in July, and signs of further deterioration in the labour market knocked the greenback lower against the low-yielding Japanese yen for much of the time.
Late in the session, the US dollar trimmed losses against the yen after The Wall Street Journal reported that troubled investment bank Lehman Brothers was actively negotiating with potential buyers, including Bank of America.
