The New Zealand dollar broke below a key resistance level as the continued slide in dairy prices and data that painted a mixed picture of the labour market weighed on the kiwi in a market less willing to take on risk.
The kiwi traded at 84.29 US cents, down from 84.68 cents at the start of the day and from 85.21 cents yesterday. The trade-weighted index dropped to 79.08 from 79.76 yesterday.
New Zealand's jobless rate fell more than expected to 5.6 percent in the second quarter, although the participation rate also fell and employment grew only 0.4 percent against forecasts of a 0.7 percent gain. Overnight, dairy prices dropped to the lowest level since October 2012, weighing on a kiwi dollar already hurting from a sell-off in equity markets and reduced risk appetite. The Reserve Bank has said the currency is unjustifiably high given the slide in prices of export commodities such as dairy and logs.
"The Reserve Bank was absolutely correct in saying the New Zealand dollar was not reflecting commodity prices, and it's probably still not," said Tim Kelleher, head of institutional FX sales at ASB Bank. "Dairy, risk off, and negative equities all combined, but dairy was the major one for us. The employment data was better, but the participation rate down, and people ignored the headline and looked at the details."
The New Zealand dollar fell to 90.61 Australian cents from 91.25 cents yesterday, dropped to 63.08 euro cents from 63.49 cents. It traded at 86.49 yen from 87.33 yen late yesterday.