Selling pressure was maintained on the New Zealand dollar which overnight came within spitting distance of its year low.
However, it picked up in late New York trading and by 8.30am was little changed from yesterday's closing level at US74.26c. It fell to a low of US73.85c.
"It
seems like every man and his dog has shown an interest to sell NZD over the past 24 hours including more medium-term investors, retail accounts out of Asia and an array of short-term speculative players," BNZ strategist Danica Hampton said.
The selling was prompted by the Reserve Bank's dovish statement yesterday when it cut the official cash rate to 8 per cent and signalled a series of cuts for the rest of the year.
Hampton said the downtrend in kiwi was slowed by profit-taking on short NZ dollar-Australian positions and by a generally weaker US dollar.
At 8.30am, the kiwi was buying A77.46c, not much changed from its A77.51c close yesterday.
BNZ expected bounces in the kiwi to be limited to the US74.40-74.50c region as concerns about the economy and looming interest rate cuts take their toll.
"However, solid support is seen ahead of US73.80c and a break below this level will likely require a general improvement in US dollar sentiment."
ANZ chief dealer Murray Hindley said traders could expect further weakness and said we could see the kiwi in the low US70c soon.
He said US investment houses had been active sellers after the RB statement.
"Rallies will be sold into," he said.
With economists expecting the Reserve Bank to cut at every rate review this year, Hindley said it could be the end of the carry trade - where traders borrow in low interest regimes such as Japan and invest in high rate regimes like New Zealand.
Meanwhile, the US dollar weakened against the yen, dragged down by disappointing news in the US housing sector and steep losses on Wall Street.
However, the greenback was slightly higher against the euro, which came under pressure as soft data cooled expectations of higher euro-zone interest rates.
- NZPA
