The New Zealand dollar dropped below 80 US cents for the first time since May 25 after unexpectedly weak economic growth extended the slide of the kiwi that had been falling since the Federal Reserve announced measures to shore up the world's biggest economy.
The kiwi dollar fell as low as 79.37 US cents, trading at 79.81 cents at 5pm, down from 80 cents at 8am and 82.27 cents yesterday.
New Zealand's economy grew just 0.1 per cent in the three months ended June, well short of the 0.5 per cent forecast by economists, as tepid construction and mining sectors weighed on the country's recovery. That will likely see the growth outlook for New Zealand pushed out, and traders aren't expecting the Reserve Bank to start hiking interest rates until July next year.
"You've got to take it for what it is, it's a weak number and adds to the weak kiwi theme," said Imre Speizer, market strategist at Westpac Bank.
"Having got down here, you're expected to just run with the signals, which is you can't just be a mild bear - you've got to turn into a really fuzzy bear and head for the woods."
The weak local data compounded the currency's earlier losses after the Federal Reserve's announcement that it would sell short-dated debt to buy long-term bonds in a bid to free up liquidity and encourage corporate borrowing sapped investors' appetite for higher-yielding, or riskier, assets.
The so-called 'Operation Twist' had been well-signalled, and markets seemed disappointed it didn't deliver more to help revive the US economy.
The New Zealand dollar fell to 70.60 on the trade-weighted index from 72.11 yesterday, and fell to 79.61 Australian cents from 80.17 cents.
It declined to 61.23 Japanese yen from 62.80 yen previously and dropped to 58.92 euro cents from 60.17 cents yesterday. It fell to 51.59 pence from 52.39 pence previously.
