NZ dollar drops along with equity markets

THE New Zealand dollar has fallen as weak equity markets around the world sapped demand for risk-sensitive assets.

The kiwi dropped to 86.39 US cents at 5pm in Wellington from 86.84 cents at 8am and 87.17 cents on Thursday.

The trade-weighted index (TWI) sank to 80.02 from 80.83 on Thursday.

Stock markets across Asia followed Wall Street lower as investors dumped their stakes in biotech and internet industries amid growing concern rising sales won't translate into actual profits.

"Global equities are all lower, with the Nasdaq down over two per cent - everything is off quite sharply in equity markets," said Michael Johnston, senior dealer at HiFX in Auckland.

"The TWI is still fairly high, and it's difficult to see that falling a lot more unless we see risk aversion gather steam."

The prospect of rising interest rates has underpinned support for the kiwi, with traders pricing in a 98 per cent chance of a hike on April 24 when the Reserve Bank next reviews policy, according to the Overnight Index Swap curve.

The kiwi extended its decline against the Australian dollar after figures on Thursday showed an unexpected fall in the Australian unemployment rate to 5.8 per cent.

The kiwi fell to 92.13 Australian cents from 92.61 cents on Thursday.

It also dropped to 87.79 yen at 5pm in Wellington from 88.81 yen and to 62.17 euro cents from 62.94 cents.

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