Surprise as NZ dollar falls
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The New Zealand dollar plunged overnight as speculators who had been betting on further rises in the kiwi conducted an overdue cleanout.
The kiwi was recently trading at US82.52 cents, down sharply from US83.40 at 5pm yesterday, while on the Trade Weighted Index of major trading partners' currencies it was 76.30.
That is the kiwi's lowest level this year against the greenback, and follows the New Zealand dollar topping US85c earlier this month.
ASB Institutional head of FX sales Tim Kelleher said the kiwi had experienced a "total wipeout" as currency traders who had taken speculative long positions on the New Zealand dollar unwound their holdings.
"Considering that most of the action was in Italy I think it's probably caught a few people by surprise," he said.
"There had been some speculative longs in the kiwi that hadn't really shifted in the last two-to-three months and if you'd looked at other currencies there'd been some movement lower over the past week or two.
"We saw the euro lower, the sterling lower and the aussie was under pressure, but the kiwi was just sitting there like a bit of a shag on the rock."
Kelleher said that a lot of the speculative positions had now unwound overnight particularly against the yen.
"We also saw some very heavy selling against Australian dollar, the euro and the sterling despite the fact there is trouble in those nations," he said.
"It was just a total wipeout really."
Kelleher expected the kiwi to find support from exporters at US82.25c and said it was unlikely to fall below US82c in a hurry.
Yesterday morning the kiwi rose as investors fretted about the prospect of a hung parliament in Italy, causing the euro to slump on fears a centre-right Italian election victory or a hung parliament would threaten fiscal reforms.
The British pound suffered earlier in the week after ratings house Moody's stripping the UK of its coveted triple-A credit rating over the weekend.
On the crosses the kiwi recently traded at 80.65 Australian cents, down from A81.16c at 5pm yesterday, and 63.25 Euro cents, down from 63.82 Euro cents.
It opened at 75.80 Japanese yen, down from 76.81 yen yesterday evening, and 54.50 British pence, down slightly from 54.59p.