The New Zealand dollar fell to its lowest level against the greenback in nearly four weeks after a shelling exchange on the Korean peninsula added to the US currency's appeal as a safe haven.The kiwi dropped to around US75.90c early today, as it continued
The New Zealand dollar fell to its lowest level against the greenback in nearly four weeks after a shelling exchange on the Korean peninsula added to the US currency's appeal as a safe haven.
The kiwi dropped to around US75.90c early today, as it continued its retreat away from the 31-month high around US79.75c reached in early November. At 8am the NZ dollar was buying US76.15c, down from US77.06c at 5pm yesterday.
Adding to the US dollar's strength were rekindled fears about Europe's debt crisis, with many investors not convinced that a rescue package for Ireland will prevent other heavily indebted members of the 16-country euro bloc from seeking aid, and Portugal and Spain are seen as the next weakest links.
"We're seeing a knee-jerk reaction to Korea but the underlying story is still the European debt crisis and contagion fears," said John Doyle, strategist at Tempus Consulting in Washington. "That will drive trading for the rest of the month. Korea is a sideshow."
BNZ markets strategist Mike Jones said news of the Korean artillery exchange had scuppered risk appetite, and immediately had an impact on regional currencies and equity indices.
"Just what we needed when the markets were already pressured by concerns that Ireland may not have the political will and ability to see through any rescue agreement," Mr Jones said.
The NZ and Australian dollars were affected by those broader market moves, although there was ongoing sovereign investor and commercial demand for both at times.
After a bumpy night, the NZ dollar was at A78.27c at 8am from A78.10c at 5pm, and squeezed up to 0.5689 euro from 0.5674.
The trade weighted index fell to 68.72 at 8am from 69.04 at 4pm, with the kiwi down to 63.26 yen from 64.22.
