The New Zealand dollar lagged behind gains in other so-called risk currencies as investors' appetite for higher-yielding assets grew after Greece outlined a fresh plan to slash its budget deficit.
The kiwi dollar underperformed as risk sensitive currencies surged on news Greek Prime Minister George Papandreou announced a plan to
cut an additional 4.8 billion euros from its budget while raising the sales tax.
The move was supported by the International Monetary Fund and the European Commissioner, though Greece warned it couldn't rule out tapping the IMF for cash if none was forthcoming from the European Union.
Investors shied away from the New Zealand currency as it becomes more apparent that the Australian dollar is a better bet offering more attractive yields.
"A lot of other currencies rose against the greenback" amid the good news out of Europe, said Khoon Goh, senior markets economist at ANZ National Bank. "The kiwi was caught in the backdraft, but really struggled to go higher."
The kiwi rose to 69.51 US cents from 69.37 cents yesterday, and dropped to 64.03 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 64.13. It slipped to 61.43 yen from 61.49 yen yesterday, and dropped to 76.63 Australian cents from 76.79 cents. It sank to 50.63 euro cents from 50.89 cents yesterday, and fell to 45.99 pence from 46.20 pence.
Goh said the currency may trade between 69 US cents and 69.80 cents today, and will stay in fairly broad ranges until the Reserve Bank of New Zealand reviews the official cash rate next week.
Governor Alan Bollard is expected to keep rates on hold at a record-low 2.5 per cent, and indicate that rates will rise towards the middle of the year.
"There's a growing realisation that the Australian economy is on its way, while the New Zealand economy, although recovering, isn't chugging along nicely," he said.
The kiwi hit a new nine-year low against its trans-Tasman counterpart after Australia's central bank hiked its benchmark interest rate to 4 per cent earlier this week, and data showed country's economy grew 0.9 per cent in the three months through December.
