"It is struggling. The main focus is on the equity markets. I think it is still vulnerable to the downside" and could fall to 64.50 US cents, said Martin Rudings, senior dealer foreign exchange at OMF
The S&P500 index fell 3.1 percent overnight, while the tech-heavy Nasdaq fell 4.4 per cent. Japan's Topix was down 2.6 per cent late today.
Rudings said the Australian dollar is faring slightly better as iron ore prices are lifting, while dairy prices continue to weaken. The kiwi traded at 92.07 Australian cents from 92.40 cents yesterday. "On the commodity front the Australian dollar is winning against the New Zealand dollar," he said.
Rudings said the kiwi barely blinked when a report showed New Zealand's September trade deficit was the largest on record as it was largely due to fuel and one-offs, like aircraft imports. A lift in fruit and meat exports was also "more of a positive story."
Markets will be watching for any commentary out of the European Central Bank overnight, particularly after the European Commission on Tuesday rejected the Italian government's budget plan. The local currency traded at 57.15 euro cents from 57.23 cents yesterday
"I think the ECB will just try to keep a steady hand," given the background volatility, said Rudings.
The trade-weighted index fell to 71.60 from 71.91. The kiwi traded at 4.5278 Chinese yuan from 4.5517 yuan and was little changed at 50.59 British pence from 50.53 pence.
New Zealand's two-year swap rate fell 2 basis points to 2.00 per cent while the 10-year swaps fell 4 basis points to 2.82 per cent.
