NZ dollar plunges as yen hits record high vs greenback

The New Zealand dollar plunged to its lowest level since September last year after the yen soared to a record high against the greenback.

Shortly after 10am, the NZ dollar fell from around 72.80USc to around 71.25USc within an hour, according to Reuters data. It recovered to be 72.23USc at 5pm, down from 73.22USc at the same time yesterday.

"There was just a mass liquidation of yen crosses late in the morning," said ANZ Foreign Exchange Manager Murray Hindley. "It was a pretty hectic morning. We haven't seen this kind of volatility since 2008 when the global financial crisis was evident."

The yen soared to a record high against the dollar as Japanese stocks drooped on Thursday, erasing a portion of the gains from the day before as the country struggled to contain a post-earthquake nuclear crisis, Associated Press reported.

The dollar was trading at ¥79.18 in Asia after plunging to ¥76.53 late on Wednesday in New York -- far below the previous all-time low of ¥79.75 set in April 1995.

Major natural disasters like earthquakes tends to bolster the yen because investors expect the Japanese public and insurance companies to buy back their home currency in order to fund the country's reconstruction, increasing demand for the yen.

"It's mayhem out there," said one trader at an Australian bank in Sydney as liquidity evaporated and bids were pulled, Reuters reported. "The yen's been moving a big figure a second on occasions. A lot of people are crying out for the central banks to step in."

ANZ economist Sharon Zollner said the low level of the US dollar against the yen had meant a large number of stop loss buyers of the yen had needed to get out of short yen positions against everything, including the NZ dollar.

The kiwi dropped to a 22-1/2-month low against the Japanese currency just above ¥55 at about 11am from around ¥58 at 10am and was ¥57.08 at 5pm.

The NZ dollar was at 73.68Ac at 5pm from 73.84Ac yesterday and at €0.5188 from €0.5242 yesterday.

The trade weighted index fell to 63.88 from 64.76 yesterday.