The New Zealand dollar fell across the board against other currencies, but dealers and brokers say it is unlikely that comments Prime Minister John Key made on Sunday and yesterday had any effect.
Earlier in the day, the dollar hit multi-year lows against the euro and the yen and came close to doing it against the United States dollar, before climbing sharply out of the hole.
On Saturday, the New Zealand dollar dropped to its lowest level in six years apart from a brief dip two weeks ago.
Mr Key appeared to slip into his old role as a money trader when on television he commented on the fortunes of the dollar.
He believed the dollar would trade below $US50c and $A80c.
Late yesterday, the dollar was trading at $US53.25 and $A81.72.
Traditionally, prime ministers shy away from commenting on the currency and interest rates but Mr Key has done both in recent days.
Before the Reserve Bank cut its official cash rate by 1.5% to 5% last week, Mr Key said he expected a "significant cut" in the central bank's cash rate.
ABN Amro Craigs broker Peter McIntyre said he had no problem with Mr Key commenting on the currency and he agreed the dollar would trade in the ranges outlined by the Prime Minister.
"It's good to have a PM who knows where the currency is and where interest rates are and how they impact on the economy. It's a bit false to say John Key's words had any effect, but saying that, the currency is off right across the board today."
Bank of New Zealand currency strategist Danica Hampton said the New Zealand dollar was initially pitched lower by renewed fears of a deep and prolonged global recession.
Data showed US employers cut payrolls by a much larger-than-expected 533,000 in November, the largest loss since 1974.
Reignited global recession fears saw commodity prices plummet and encouraged investors to dump growth-sensitive currencies such as the New Zealand dollar, she said.
Mr McIntyre said a significant scheduled redemption of New Zealand dollar-denominated eurodashi and eurokiwi bonds posed risks for the dollar in the next six months.
In the past three months, only one-third of $4.9 billion of scheduled redemptions had been placed.
In November, scheduled redemptions were $2.2 billion; actual issuance was $26 million.
"Negative net issuance of over $2 billion in the month of November contributed in no small part to the dollar's significant underperformance that month."
The cumulative redemption schedule of $6.9 billion would pose even greater challenges in the next six months, particularly so when the official cash rate was forecast to fall to 3.5%, he said.
Volatile equity markets had also seen investors rush back to the larger currencies like the US dollar, euro and yen.
"The New Zealand currency is traditionally tied to dairy prices. When they come off, so does the dollar. Dairy prices are linked to oil prices and they have also come off. The outlook is for a weakening currency in the next six months," Mr McIntyre said.
