KEY POINTS:
The New Zealand dollar closed below US70c for the first time in 11 months last night and with more Reserve Bank rate cuts on the way there is little to stop it falling further, currency watchers say.
The kiwi closed at US69.70c - its lowest close since September
last year and not far off the US69.50c low it touched earlier in the session.
Once again, currency experts cited firmness in the US dollar as the major factor driving most currencies, including the kiwi, lower.
"The market's saying the US economy is bad but everyone else is starting to get the contagion too," said Earl White of Bancorp Treasury Services.
With other currencies now softening as a result of the gloomier outlook, investors who had "shorted" the US dollar, betting it would weaken, were now taking profits which also had the effect of lending the greenback support.
White also noted the kiwi had already been on the way down before the US dollar began to firm because of the Reserve Bank's rate cut last month and the prospect of more to come in response to the worsening local economy.
Another factor in yesterday's low was the influence of the Australian dollar which lost three-quarters of a cent against the greenback on data showing business conditions at their most negative in seven years.
The Aussie dollar's losses against the greenback had been even sharper than the kiwi's, noted Westpac currency strategist Michael Gordon.
"A month ago it was at all time highs around US98.50c and the debate was still about whether the Reserve Bank of Australia would maintain a tightening bias, now they've pretty quickly shifted and signalled they're ready to start cutting rates soon."
White said falling commodity prices were also weighing on the aussie.
"If, after the Olympics, we start to see confirmation that China is going to continue buying commodities and we see commodity prices and oil recover a bit that would probably underpin the aussie and put some pressure back on the US dollar. We'd see the kiwi bounce, but until then if the aussie keeps falling we're going to go too."
At 5pm yesterday, the aussie was buying US87.73c, having lost almost a cent against the greenback during the session.
The Australian dollar's recent weakness had seen it lose ground against the kiwi dollar in the last few weeks and last night the kiwi was buying A79.47c, up half a cent in the preceding 24 hours.
The kiwi's recent gains against the aussie had offset much of its losses against the other currencies on the trade weighted index which closed last night at 64.55.
Looking ahead, Gordon said the US dollar was likely to continue enjoying its current status as the least ugly unit among the motley-looking major currencies.
In New Zealand, where there was little question the economy was in recession. "There's nothing on the horizon that will convince the market that the RBNZ is not going to keep cutting rates so the way is clear for the kiwi to keep sliding lower as well."
