The New Zealand dollar touched a fresh three-month low of 84 US cents overnight as investors unwind bets for the currency's acceleration, and the downward trend is expected to continue.
The kiwi was little changed at 84.15 US cents at 8am in Wellington from 84.13 cents at 5pm yesterday. The trade-weighted index was also little changed at 78.71 from 78.67 yesterday.
The New Zealand dollar has dropped 2.8 percent the past month as investors pull back their expectations for its continued appreciation, on concern a fall in commodity prices will weigh on growth and limit interest rate increases. Dairy prices fell 4.2 percent in Fonterra Cooperative Group's latest GlobalDairyTrade auction yesterday, taking the decline since February to 26 percent. The local currency is also under pressure as investors pull back bets for its gain against its Australian counterpart amid signs of a recovery in the neighbouring economy
"We are under a bit of pressure from the unwinding of the kiwi/Aussie cross trades" said Martin Rudings, senior advisor at OMF. "We have also been unwinding some of the interest rate hikes that have been built into the market here. The kiwi looks like it wants to go down a bit further."
Rudings expects the kiwi will decline to 81 US cents by the end of July as a revival in the US economy underpins the greenback.
The New Zealand dollar touched a fresh six-month low of 90.55 Australian cents overnight and was trading at 90.64 cents at 8am from 90.73 cents at 5pm yesterday.
Today, traders will be eyeing a report on Australia's trade balance for April.
Better-than-expected first quarter growth figures in Australia yesterday helped underpin the Aussie as investors change their bets on the currency's direction away from 'short' positions, which anticipate a currency will decrease in value, said OMF's Rudings.
"The market has been 'short' for a long time and from early this year they have unwound all their 'short' positions in the Aussie but they haven't really got any 'long' and I think we might be seeing the market going from 'neutral' Aussie to slightly 'long'," he said.
Rudings says the kiwi is unlikely to fall below 89 Australian cents as the local currency will remain supported by a likely increase in interest rates at the Reserve Bank meeting next week.
The New Zealand dollar advanced to 61.85 euro cents from 61.79 cents yesterday ahead of the European Central Bank meeting today where further stimulus is expected.
The kiwi was little changed at 50.25 British pence from 50.29 pence yesterday, and at 86.41 yen from 86.35 yen.
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