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The New Zealand slides after a fall in the headline unemployment rate masked underlying figures showing a weak labour market, spooking investors who have been upbeat about the local economic recovery.
The kiwi fell to 83.52 US cents at 5pm in Wellington from 84.17 cents at 8am and 84.45 cents yesterday. The trade-weighted index dropped to 75.68 from 76.38 yesterday.
The jobless rate fell to 6.9 percent in the December quarter from a 13-year high in the September period, as an increasing number of people left the labour force.
The participation rate fell to 67.2 percent, its lowest level in almost nine years, and employment shrank 1 percent in the three months ended December 31.
Economists had been expecting perkier numbers as businesses ramp up hiring in the face of the Canterbury rebuild.
"The market was in the mood to play up the negatives in the employment release and that took the gloss of the currency," says Mike Jones, currency strategist at Bank of New Zealand in Wellington. "The labour market numbers provided food for thought for the kiwi dollar."
The local figures came out before Australian employment data, which showed the unemployment rate held at 5.4 percent across the Tasman as the number of jobs grew by 10,400 in December.
While the headline figure is better across the ditch, Australia's participation rate of 65 percent is below New Zealand's. The kiwi fell to 80.99 Australian cents from 81.55 cents yesterday.
The fortunes of the transTasman neighbours has been shifting in recent months, with a peak in Australia's mining boom coming in view and New Zealand's $30 billion-plus reconstruction effort in Canterbury gathering momentum.
That is seen the respective central banks in different phases. The Reserve Bank of Australia is considered likely to cut rates next month, and New Zealand's central bank on hold, with its next move expected to be a hike.
The local currency dropped to 77.99 yen from 79.20 yen yesterday, and declined to 61.84 euro cents from 62.20 cents. The kiwi fell to 53.37 British pence from 53.94 pence yesterday.