The New Zealand dollar fell as the continued decline in crude oil prices stoked concern that global economic growth may be faltering, weighing on equity markets and sapping risk appetite.
The kiwi fell to 77.61 US cents as at 8:30am in Wellington, from 77.70 cents in late New York trading on Friday and from 77.90 cents in Asia at the end of last week. The trade-weighted index was at 78.18, down from 78.28.
West Texas Intermediate crude oil for January delivery fell to US$57.81 a barrel on the New York Mercantile Exchange on Friday, rounding out a 12 percent weekly slump driven by concerns global production will outstrip demand. Adding to weak sentiment for crude oil, the International Energy Agency cut its forecast for global demand for the fourth time in five months. The kiwi starts the week on a weaker footing ahead of the US Federal Reserve's policy meeting and local economic growth and balance of payments data for the third quarter.
Tuesday will also see release of the half fiscal and economic update from the New Zealand Treasury, at which a small deficit is expected to be forecast, rather than the surplus forecast at the time of the May budget, largely reflecting weak tax receipts.
"Market sentiment has shifted to something markedly less positive," said Raiko Shareef, a strategist at Bank of New Zealand. "Investors now appear concerned that the failure of oil prices to find a bottom is a symptom of chronically weak global demand." The kiwi followed commodity-sensitive currencies, "which were dragged lower by still-falling oil prices."
Fed policy makers meet in Washington in the wake of Wall Street's worst weekly drop in three years, amid heightened concern that the plunge in the price of oil might trigger an overall weakening in the global economy. Economists say a key focus for Fed watchers will be whether policy makers will retain the phrase that interest rates will remain low for "a considerable period".
In New Zealand, government figures on Thursday are expected to show the economy grew 0.7 percent in the third quarter, based on a Reuters survey, unchanged from the pace three months earlier and slower than the 0.9 percent rate the Reserve Bank forecast this month. Today, the Australian government releases its mid-year fiscal update while the Bank of Japan releases its Tankan survey of business sentiment.
The local currency fell to 92.18 yen from 92.62 yen in Wellington on Friday. It weakened to 94.25 Australian cents from 94.63 cents and fell to 62.22 euro cents from 62.84 cents. It fell to 49.34 British pence from 62.73 cents.