The New Zealand dollar fell to its lowest in more than three months overnight, then rebounded as investors deemed the country's growth outlook isn't as bad as its peers.

The kiwi touched 63.46 US cents overnight and was trading at 64.19 cents at 8am in Wellington, from 63.77 cents at 5pm yesterday. The trade-weighted index advanced to 71.08 from 70.65 yesterday.

Risk aversion dominated the market, prompting investors to seek the perceived safety of US Treasuries over equities, on concern about plunging oil prices and the outlook for global growth. US crude oil plunged to a low of US$26.30 a barrel, its weakest since May 2003, after the International Energy Agency warned the market could "drown in oversupply", while an unexpected drop in the US consumer price index in December stoked speculation the Federal Reserve may hesitate to raise interest rates further.

Even though the kiwi was dented by weaker than expected consumers price index data yesterday, it rebounded this morning as investors favoured its prospects over other currencies.


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"As bad as the sentiment and doom and gloom feeling following the CPI data and falling commodity prices, New Zealand in comparison to the rest of the world is looking a lot less bad," said Peter Cavanaugh, an advisor at Bancorp Treasury Services. "It's a lot less worse than most - New Zealand may have taken one step back yesterday, the rest of the world took two."

Global growth concerns have dented the currencies of countries exporting so-called 'hard' commodities such as oil and iron ore more than countries like New Zealand, which exported 'soft' commodities such as food, he said. The country's tourism industry was also receiving a boost from the currency's decline, he said.

In New Zealand today, the BNZ-BusinessNZ performance of manufacturing index is released at 10:30am while the ANZ-Roy Morgan consumer confidence survey is published at 1pm.

The New Zealand dollar advanced to 93.08 Australian cents from 92.91 cents yesterday ahead of Australian reports on inflation expectations and new home sales.
The kiwi gained to 58.85 euro cents from 58.25 cents yesterday ahead of the European Central Bank meeting, where no change to policy is anticipated, although comments on the outlook will be in focus.

The local currency rose to 45.33 British pence from 45.07 pence yesterday, advanced to 74.87 yen from 74.60 yen, and increased to 4.2225 yuan from 4.1943 yuan.