The New Zealand dollar continued to track lower overnight with investors' appetite for risk-assets dented after the European Central Bank warned of economic headwinds and demand at the latest Spanish bond auction fell short of expectations.
The kiwi recently traded at US81.43 cents, down from US81.60c at 5pm yesterday, while on the Trade Weighted Index of major trading partners' currencies it fell 72.95 from 73.08 previously.
Overnight, ECB President Mario Draghi said the already fragile euro zone economy faces further downside risks due to its lingering debt crisis and high energy prices.
Adding to the negative momentum, Spain's latest bond auction failed to achieve its target, with 2.59 billion euros worth of bonds sold, short of the 3.5 billion euros the embattled government had hoped to raise.
That saw investors continue to pull out of their risk positions in favour of safe haven assets such as bonds and the US dollar.
On Wall Street, the Standard & Poor's 500 Index dropped 0.9 per cent to 1400.47 in afternoon trade, while Europe's Stoxx 600 Index closed 2.1 per cent lower at 258.76.
The yield or the premium investors demand to hold a debt security, on US 10-year Treasury Bills fell to 2.232 per cent from 2.2807 yesterday, and commodities fell 1.9 per cent to 304.96 as measured by the Thompson Reuters Jefferies CRB Index.
"Reluctant cracks are beginning to appear on the Australasian currency front," said Alex Sinton, a senior dealer at ANZ New Zealand. "With current weakness in the Australian dollar weighing on the fortunes of the New Zealand dollar, further tests of support levels are possible."
On the crosses, the kiwi recently traded at 79.37 Australian cents, down from A79.45c yesterday, and it fell to 67.19 yen from 67.47 yen. The currency gained to 61.99 euro cents from 61.85 euro cents, and slipped to 51.25 pence from 51.37 pence.
The kiwi may trade between a range of US81.10c and US81.95c, Sinton said, with further downside moves likely.
