NZD/USD holds near daily lows in risk-off turn in US markets

NZD/USD is trading at 0.6944 in early Asia and down over 1% on the day as high-beta currencies take a hit.

The currency fell from a high of 0.7019 to a low of 0.6934, compromised by the generalised softening in global risk appetite.

Wall Street ended lower on Thursday, retreating from record closing highs in a broad sell-off driven by uncertainties surrounding the pace of the US economic recovery.

Data on Thursday uncovered cracks in the US economic recovery. Consequently, the US dollar was also sold as traders covered short positions in the bond market.

The yield of the benchmark 10-year US Treasury note dropped for the eighth consecutive session when the number of US workers filing first-time applications for unemployment benefits unexpectedly ticked up to 373,000 last week.

This is a sign that the US labour market recovery remains vulnerable. 

As the bond market rallied on a flight to safety with US bond yields dropping to 5-month lows overnight, the moves were mainly isolated to the commodity currencies, and in particular AUD and NZD.

''If the risk-off mood is sustained, more weakness is on the cards, but US equities and bond yields are already up off lows, and ultimately we think the NZD will find support from cyclical economic momentum and earlier OCR hikes,'' analysts at ANZ Bank argued.