The New Zealand dollar fell against the euro after Europe's finance chiefs gave Greece easier terms for its 130 billion euro bailout in a bid to shore up the region's mounting sovereign debt problems.
The kiwi traded at 82.25 US cents at 5pm in Wellington from 82.14 cents at 8.30am and 82.40 cents yesterday. It fell to 63.36 euro cents from 63.57 cents yesterday.
The euro rose as much as 0.3% and recently traded at $US1.2982 after European finance ministers finally reached accord over how to grant Greece its next tranche of rescue funds after official sector investors in the Mediterranean nation's bonds, including the European Central Bank, balked on writing down their assets.
Eurozone legislators agreed to cut the interest rates on loans to Greece, suspend interest payments for a decade and give the Mediterranean nation more time to repay its debt, as well as setting up a bond buyback programme.
Greece was also cleared to get a 34.4 billion euro loan instalment next month.
"They're looking at some pretty ugly numbers regardless," says Tim Kelleher, head of institutional FX sales NZ at ASB Institutional in Auckland. The muted response in the kiwi "might be a bit of 'buy the rumour sell the fact'," he said.
The kiwi may have found some support from the final pricing and allocation of Fonterra's shareholders' fund, which seeks to raise $525 million to reduce redemption risk for the dairy exporter. About 42% of the fund will go to overseas investors.
"That's a couple of hundred million and there might be more demand [when trading begins on Friday] as people missed out," Mr Kelleher says.
Respondents in the Reserve Bank's survey of expectations sliced 20 basis points from their one-year median forecast for the consumer price index to 1.77%, below governor Graeme Wheeler's long-term aim under the policy target agreement. The two-year ahead median expectation was at 2.3%, down by the same amount.
Government figures also showed a wider than expected trade deficit in October as dairy exports fell 20%. The deficit was $718 million last month from a revised gap of $775 million a month earlier, according to Statistics New Zealand.
The annual deficit widened to $1.37 billion from a deficit of $880 million in the 12 months to September.
The trade-weighted index declined to 73.50 from 73.73 yesterday.
The kiwi declined to 51.29 British pence from 51.42 pence and dropped to 78.48 Australian cents from 78.74 cents yesterday. It sank to 67.44 yen from 67.77 yen.