The kiwi fell and the Australian dollar briefly dipped below parity with the greenback for the first time since December amid growing concerns Greece will have to call another general election.
BUSINESSDESK: The New Zealand dollar fell in local trading and the Australian dollar briefly dipped below parity with the greenback for the first time since December amid growing concerns Greece will have to call another general election.
The kiwi fell to 78.16 US cents at 5pm from 78.47 cents at 8am, and was down from 78.27 cents at the close of trading in New York on Friday.
The trade weighted index was little changed at 70.40 from 70.43 last week.
The Australian dollar fell as low as 99.97 US cents, the lowest since December 20, as the deadlock in Greek negotiations to form a new government raises fears the Mediterranean nation may be forced out of the Euro zone.
The Australian dollar traded at $US1.0015 at 5pm.
Last week's Greek general election threw up a hung parliament after the two major parties that brokered its regional bailout package failed to secure enough support to govern.
If euro states such as Greece don't step into line on budget cuts, Europe's debt crisis may reignite and slow global growth and demand for growth-linked currencies.
"The market has factored in a pretty decent chance of Greece going back the polls in June, and there's a higher risk Greece will exit from the Euro," said Mike Jones, currency strategist at Bank of New Zealand.
"The Australian dollar is starting to suffer more than the kiwi on heightened risk aversion."
Reserve Bank of Australia deputy governor Philip Lowe told the ADC Future Summit in Melbourne the central bank expects inflation to remain contained, but that the nation's two-speed economy will continue with non-mining sectors lagging behind the resources boom.
The New Zealand dollar was unchanged on 78.04 Australian cents from the close of trading in New York on Friday.
Traders will be waiting for the first meeting between new French President Fraincois Hollande and German Chancellor Angela Merkel tomorrow after Euro-zone finance chiefs meet in Brussels tonight to review their options to deal with the stalemate in Greece and deepening bank crisis in Spain.
The kiwi will probably fall this week as investors remain fixated on Europe's political turmoil and the spill-over into financial markets, according to six analysts surveyed by BusinessDesk.
New Zealand first-quarter retail sales shrank 1.5% in the first three months of the year as people reined in their spending at supermarkets and grocery stores after splashing out during the Rugby World Cup.
That was just ahead of the 1.4% decline forecast by a Reuters survey of economists, and Mr Jones said the market was preparing for a worse figure.
The kiwi was almost unchanged at 60.56 euro cents from 60.55 cents last week and little changed at 48.65 pence from 48.66 pence.
It was unchanged at 62.53 yen from last week.
