The local currency was put on the backfoot by Federal Reserve chairman Jerome Powell's upbeat assessment of the US economy and growing concerns about Italy's budget plan.
Fears about Europe were heightened by reports quoting Italian lawmaker Claudio Borghi as saying the country's problems could be solved if it returned to a national currency. Italian Prime Minister Giuseppe Conte later said the euro was "unrenounceable".
The US dollar remained in favour in Asian trading, paring some of those gains when Italy reportedly pledged to reduce its budget deficit to 2 per cent of gross domestic product in 2021, reversing plans for a bigger shortfall for the next three years. The focus on Italy's debt came in the wake of successful free trade talks in North America.
Imre Speizer, Westpac Banking Corp's head of NZ strategy, said markets "breathed a sigh of relief" after the US, Mexico and Canada sealed a new trade deal and "now we look to the next major negative risk potential which is the Italian budget."
Domestically, news that global dairy prices continued to wane in the overnight GlobalDairyTrade auction and weaker New Zealand commodity prices in September also weighed on the kiwi.
Looking ahead, Speizer said the US jobs data due on Friday in Washington "will be the focus."
The local currency fell to 56.77 euro cents from 57.11 euro cents. The kiwi traded at 50.59 British pence from 50.69 pence yesterday and fell to 74.73 yen from 75.30 yen. It dropped to 4.5150 Chinese yuan from 4.5384 yuan. The kiwi rose to 91.62 Australian cents from 91.36 cents yesterday.
New Zealand's two-year swap rate decreased 1 basis point to 2 per cent, while the 10-year swap fell 4 basis points to 2.84 per cent.
