The New Zealand dollar dropped against the US dollar this morning after some strong United States economic figures and a dairy pricing mishap.
The dollar was trading about US84.6 cents shortly after midnight and dropped about half a cent to a low of US84.1c about 9am. By early afternoon it was trading at US84.2c.
ANZ senior foreign exchange strategist Sam Tuck said the dollar took a brief tumble after a mistake in the reporting of this morning's GlobalDairyTrade auction, which led to dairy prices falling 0.6 per cent.
The price for whole milk powder was initially reported as being down 11.5 per cent. In fact, it was up 3.4 per cent.
"I think they just transposed the previous auction's result onto this month," Tuck said.
But while the dollar bounced back from US84.21c to US85.5c after the mistake was corrected, it soon dropped again.
Tuck said the New Zealand dollar was already under pressure from yesterday's fall in the producer price index and strong economic information from the US, including housing starts.
"The price action tells us the market wants to sell the New Zealand dollar," Tuck said.
"There was a very large reaction to the GlobalDairyTrade auction."
The dollar was flat against most other currencies, including the Australian dollar, trading about A90.4c at 1.30pm.
BNZ senior market strategist Kymberly Martin said the New Zealand dollar was a victim of "broad US dollar strength" that kicked in early this morning.
"The latest GlobalDairyTrade dairy auction also took place early this morning and appeared to inspire some New Zealand dollar volatility," Martin said. "The 0.6 per cent fall in average dairy prices was actually rather stable following recent sharp declines.
"However, the 41 per cent decline in prices since February suggests a drag on economic activity over the coming 18 months."