The New Zealand dollar fell to its lowest in more than three years as investors sold euro and bought US dollars, weakening other currencies against the greenback.
The kiwi touched 74.25 US cents on Monday morning, having broken through its 2012 support levels around 74.50 cents, and reaching its lowest level since November 2011 when it touched 73.67 cents.
The local currency was trading at 74.36 US cents at 8am in Wellington, from 74.50 cents at the New York close and 75.10 cents at 5pm in Wellington on Friday. The trade-weighted index declined to 76.92 from 77.24 on Friday.
The dollar index, which measures the greenback against a basket of currencies, surged to an 11-year high of 95.481.
“It’s a broader US dollar story and a continuation of the theme that we saw on Friday night which was sell all the things against the US dollar,” said BNZ currency strategist Raiko Shareef.
The kiwi and Aussie are also weaker as investors speculate that a slump in commodity prices, low inflation and a round of interest rate cuts by other central banks signal weak global demand, which could prompt the Reserve Banks of Australia and New Zealand to reduce interest rates.
New Zealand’s central bank is expected to keep its benchmark rate at 3.5 per cent when it announces its decision on Thursday, although some economists expect the bank to remove its tightening bias.
In New Zealand the BNZ-BusinessNZ Performance of Services Index is scheduled for release.
This week, investors will be focused on Wednesday’s Federal Reserve meeting for signs that US policymakers might waver on their course to higher interest rates and US fourth quarter gross domestic product data is also out.
The New Zealand dollar advanced to 94.37 Australian cents from 93.57 cents on Friday as weaker commodity prices weighed more heavily on the Aussie.
The kiwi advanced to 66.57 euro cents from 66.07 cents, slipped to 49.58 British pence from 50.02 pence and touched a two-month low of 87.27 yen and was trading at 87.45 yen at 8am from 88.89 yen.