NZ dollar dives as Dubai nears default

The New Zealand dollar fell broadly overnight, sinking to its lowest level in more than five months against the Australian currency and down to a near four-month low against the yen.

A shock move by Dubai to restructure its biggest corporate debtor, Dubai World, and delay repayment on some of the company's $US59 billion ($NZ82.4b) of liabilities, dented risk appetite across asset markets, to the US dollar's benefit.

The kiwi fell to US71.25c, its lowest level in more than three weeks, and by 8am was at US71.62c from US72.49c at 5pm yesterday.

BNZ Capital senior strategist Danica Hampton said that, following the Dubai news, the backdrop of falling equities and risk aversion saw investors shun growth-sensitive currencies such as the NZ dollar.

The kiwi fell as low as A78.19c against the aussie, but by 8am was back up to A78.36c, little changed from its level at the local close.

The kiwi has been falling against the Australian currency for about seven weeks, from a nine-month high around A83.80c.

The kiwi also got down to 61.62 yen, from 62.86 at 5pm, and by the local open had managed to get back to 61.94.

Against the European currency, the NZ dollar reached a 2-1/2-month low of 0.475 euro, and by 8am was up to 0.4772 euro from 0.4789 at 5pm. The trade weighted index fell to 63.64 at the local open from 64.14.