Friday 5th September 2008
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The kiwi touched as low as 65.94 US cents, the lowest since November 2006 and recently traded at 66.50 cents. The currency has declined about 18% this year. It fell as low as 69.99 yen, the lowest since July 2006.
US stocks fell after Federal Reserve Bank of San Francisco president Janet Yellen said there were "substantial risks" of slower US economic growth, with a "sluggish" pace expected in the second half of the year.
Labor Department figures showed the number of Americans registered as jobless rose to 3.435 million, the highest since November 2003.
Investors get another snapshot of the US labour market tomorrow, with the release of monthly payroll figures. Employers probably cut 75,000 jobs last month, economists predict. Meantime, the Reuters Jefferies CRB futures price index fell 0.6% to 374.55
"Escalating concern about the global growth outlook continues to take a toll on commodity prices, global equities and risk appetite," said Danica Hampton, currency strategist at Bank of New Zealand.
Less appetite for risk tends to spur investors to unwind holdings of higher-yielding currencies such as the kiwi, which they've funded by borrowing cheaply in yen, known as the carry trade.
New Zealand's 8% official cash rate is one of the highest benchmark interest rates worldwide for a country with the highest credit rating at Moody's Investors Service. Most economists expect the central bank will lower the rate a quarter point when it next reviews rates on September 11.
Hampton said there's room for the kiwi to extend its slide should stock markets in Asia follow the US lower today.
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