The New Zealand dollar was caught up in aggressive selling today, mirroring a sharemarket sell-off after investment bank Lehman Brothers filed for bankruptcy protection.
By 5pm, the kiwi was at US65.05c, down from US66.87c late yesterday afternoon. But it outperformed the Australian dollar which hit a year-low against
the US dollar, the kiwi rising to A82.36c from A81.40c yesterday.
"We're being driven by offshore events - weak US dollar, weak Australian, weak commodity prices," said one dealer.
"On an interest rate differential, we actually should be stronger than where we are, but nobody wants to take risk on."
The kiwi hit a four-year low against the yen which rallied on the unwinding of carry trades, in which investors borrow low yielding currencies such as the yen to invest in higher yielding riskier assets such as the NZ dollar.
The US dollar was sold-off ahead of the US Federal Reserve's decision on interest rates tomorrow morning, with the market increasingly expecting a rate cut of up to 50 basis points when before the weekend no change was forecast.
Investors were also selling as risk aversion spread on the back of a slump in equities following the collapse of Lehman Brothers, and other financial sector woes such as the fire sale of Merrill Lynch and concerns about insurer AIG.
Currency rates:
NZ dlr/US dlr US65.015c US66.87c
NZ dlr/Aust dlr A82.36c A81.40c
NZ dlr/euro 0.4568 0.4650
NZ dlr/yen 67.95 70.85
NZ dlr/stg 36.26p 37.15p
NZ TWI 61.94 63.19
Australian dollar US78.97c US82.09c
Euro/US dollar 1.4241 1.4380
US dollar/yen 104.45 105.99
- NZPA
