It has been a broad-based sell-off, falling against most major crosses.
BNZ senior markets strategist Jason Wong it had been a steady fall. The NZD/USD and NZD/EUR crosses had been down for nine consecutive days.
From its peak on April 12, the dollar had fallen by 2% to 4% on the various crosses."The recent tumble takes the dollar down from somewhat richly priced to just below our current fair value of US71.70c."
There was strong fundamental and technical support in the US69c to US68c range. However, the technical relative strength indicator would argue the speed of decline meant the dollar was oversold, he said.
Recent price dynamics had not just been about a weaker New Zealand dollar.
In the past two weeks, the US dollar had been the best performing of the majors. The trade-weighted index (majors) was up about 2%.
Theories abounded why the US dollar had broken out but again, Mr Wong could only point to poor positioning exacerbating the move.
Commodities Futures Trade Commission data pointed to heavy short US dollar positioning. In dollar terms, the latest data showed the largest net short position since 2011.
When positioning was so lop-sided, it did not take much for a reversal of fortunes as trades scrambled to cover their positions, he said.
Some of the candidates to cause a reversal in the US currency included: Short positions becoming uncomfortably expensive as US dollar short-term rates climbed higher. US treasury yields reaching fresh highs for the year, including breaking through the psychological barrier of 3%. The positive US data flow continuing against a backdrop of softer global indicators.
The BNZ had previously highlighted how the relationship between currencies and interest rates had broke down.
If the previous relationship shown by the model returned to haunt the market, it would set the scene for an almighty broad-based US dollar recovery from here, sending the NZ dollar spiralling down, Mr Wong said.
