The New Zealand dollar closed near its session lows after fear again gripped equity and currency markets.
The euro fell in Asian trading and so too did the Australian dollar. Both trends were negative for the New Zealand dollar even though dairy co-operative Fonterra released a forecast milk payout for next season that suggested a significant boost for the New Zealand economy.
Fonterra has boosted its milk payout forecast for next season to between $6.90 and $7.90 a kilogram of milksolids.
But currency investors are intent on taking profits on rallies in high yielding currencies. Investors are still worried about sovereign debt in Europe, and today sellers of euro were citing worries about banks needing bailouts after a small bailout of a Spanish bank.
Around 5pm today, the NZ dollar was at US66.75c, down from US67.19c at 8am, and US67.39c at 5pm yesterday. It rose to 0.5422 euro at 5pm from 0.5385 at the same time yesterday.
It was little changed A81.33c from A81.27c yesterday.
Murray Hindley, chief currency dealer at ANZ, said futures prices were indicating that the US share market would be weaker and that suggested local currencies would be driven lower overnight.
The Fonterra payout was positive and it drove the NZ dollar to the session high near US67.20c but the currency retreated from there to end near session lows.
BNZ strategist Mike Jones said the focus of markets has returned to the euro and the headwinds posed to global economic recovery from the European sovereign debt crisis.
The backdrop was not supportive for a growth-sensitive currency such as the NZ dollar, which was soon sliding back, Mr Jones said.
The NZ dollar was at 60.05 yen from 60.77 yen yesterday. The trade weighted index fell to 65.15 from 65.31 yesterday.
