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The New Zealand dollar fell to a five-month low after the European Central Bank said it will temporarily stop lending to Greece's banks, damping investors' appetite for risk-sensitive assets.
The New Zealand dollar fell as low as 76.20 US cents in Northern Hemisphere trading from 76.48 cents yesterday. It traded at 76.30 cents just before 8am. The trade weighted index slipped to 69.33 from 69.47.
Investor nerves remained fragile after Europe's central bank said it will put a temporary hold on lending to some Greek banks to limit its risk in response to the Mediterranean nation's inability to elect a government. ECB President Mario Draghi signalled the bank won't compromise on its key principals just to keep Greece in the euro, and acknowledged for the first time that Greece could leave the euro. The bank has no new plans for policy action and is instead waiting to see the outcome of the next election.
"You have to be cautious of these kinds of headlines because they are still just making the market jump," said Rebecca Orlowitz, analyst at Commonwealth Bank of Australia in New York. "The kiwi has just slowed back down - we expected 78.60 US cents to cap the topside but I think we are looking to go below 76.20 cents before we see some buyers."
Greece’s three main political parties have been unable to reach an agreement since elections on May 6. The nation will probably return to the ballot box on June 17. This date is yet to be confirmed.
"Until we see these elections it kind of just a call for 'what's your view?'" Orlowitz said.
US Federal Reserve policy makers said extra stimulus may be needed to help boost the world's largest economy if growth slows or there is elevated risk, according to the minutes from the Federal Open Market Committee's April meeting.
Earlier this year the Fed reaffirmed its pledge to keep interest rates near zero until at least the end of 2014.
Investors will be eyeing the sale of French and Spanish government bonds on Thursday to see if the region's debt crisis is continuing to worsen. It will be the first French auction since Francois Hollande defeated Nicolas Sarkozy as president.
In New Zealand, ANZ Job Advertisements for April and March's Producer Price Index from Statistics New Zealand will be released today.
The New Zealand dollar fell to 60.06 euro cents from 60.21 cents yesterday and declined to 77.04 Australian cents from 77.23 cents. The kiwi was little changed at 47.89 British pence from 47.94 pence yesterday and was largely unchanged at 61.27 yen from 60.21 yen.
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