NZ dollar plunges amid market fears

The New Zealand dollar plunged against the currencies of the United States and Japan as fears of contagion stemming from the Greek debt crisis escalated.

After charging up yesterday to a peak around US72.75c on the back of stunning job figures and a speech by Reserve Bank Governor Alan Bollard, the kiwi fell fast early today. According to Reuters figures it dropped to a month low around US70.10c before pulling out of the dive to be at US71.07c by 8am today.

Adding to the overnight drama, US stocks plunged suddenly and briefly by more than 9 percent before pulling back to a near 3 percent drop. Some reports were blaming a trading error at a major firm for the sharp dive.

The European Central Bank also left interest rates at a record low 1 percent, as expected, with President Jean-Claude Trichet saying the ECB had not considered buying government debt to stop the euro's rout, as some had speculated, and a Greek default was "out of the question".

But with the ECB offering no new measures to ease the Greek debt crisis, the euro tumbled to a 14-month low against the US dollar, while the yen surged.

The kiwi reached its highest level in nearly three years at 0.5705 euro, but by 8am had fallen to 0.5628, below its level of 0.5667 at 5pm yesterday.

The NZ dollar was also down to 64.17 yen at the local open from 68.25 at 5pm, having troughed at a two-month low of 61.84 yen.

After peaking at a four-month high against the Australian dollar, at A80.75c, the kiwi fell to A80.14c at 8am, little changed from its level at the local close.

As Britons went to the polls, amid expectations of a hung parliament, the NZ dollar got to 48.31p during the night but then fell away to be at 47.86p by 8am. The NZ dollar has been climbing against the British currency for much of the past 14 months, from a level around 34.50p.