The New Zealand dollar fell after a survey showed business sentiment, especially in the construction sector, has become even grimmer and as domestic interest rates hit fresh record-lows.

The kiwi was trading at 65.97 US cents at 5pm in Wellington, off the day's low of 65.85 cents but down from 66.15 cents this morning and 66.28 cents late yesterday. The trade-weighted index fell to 72.56 points from 72.97.

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The ANZ Business Outlook survey for July found a net 44.3 per cent of businesses expect general business conditions to worsen in the next 12 months, a deterioration from last month's 38.1 per cent reading.

Their optimism about their owned activity also dimmed, with just a net 5 per cent expecting an improvement, down from 8 per cent last month. Within the construction sector, a net 33.3 per cent expect things to get worse for their own businesses.


"For the people who understand that survey, the main thing they look at is the activity outcome," says Imre Speizer, currency strategist at Westpac. "That one does give you a timely lead on the GDP data."

Not only is the ANZ survey monthly, but each month's figures are published at the end of the month. GDP figures for the June quarter will be nearly three months old by the time they're published.

Speizer says the ANZ data makes it even more likely that the Reserve Bank will cut interest rates next week.

The official cash rate is already at a record low of 1.5 per cent and RBNZ is expected to cut it to 1.25 per cent.

"From a market perspective, it's a done deal. The only question is what guidance we get," he says.

If RBNZ doesn't signal further cuts are likely or possible, the currency could rebound.

Bank of New Zealand head of research, Stephen Toplis, who is usually one of the more bullish economists, has pencilled in another OCR cut for November.

"Today's ANZ business opinion survey was the straw that broke the camel's back," Toplis says in a note.


"It joins a long list of leading indicators that suggest growth in New Zealand is likely to slump to levels well below that which the Reserve Bank is expecting," he says.

"The RBNZ has already cut interest rates once because of the risk of a slowdown. We think it will do so again next week and now concede an August cut is unlikely to be the last."

RBNZ's rate cut will follow a cut by the Federal Reserve expected early tomorrow, New Zealand time.

An extra drag on the kiwi today was Australian inflation data which came in slightly higher than expectations and prompted buying of Australian dollars.

The New Zealand dollar was at 95.61 Australian cents from 96.20, at 54.23 British pence from 54.42, at 59.11 euro cents from 59.28, at 71.58 yen from 71.80 and at 4.5378 Chinese yuan from 4.5526.

The New Zealand two-year swap rate eased to a bid price of 1.2150 per cent from 1.2331 yesterday while the 10-year swap rate fell to 1.6350 per cent from 1.6500.