The New Zealand dollar fell on concerns about the strength of Spain's banking system as rumours of a run on cash at the recently nationalised Bankia SA heightened speculation that the region's debt crisis is spreading.
The New Zealand dollar fell to 76.28 US cents at 8am from 76.66 cents on Thursday. The trade weighted index declined to 69.24 from 69.44.
The Spanish government denied a report that the nation's fourth-largest lender, Bankia, was suffering from a run on deposits as official data showed the nation has fallen back into recession.
"Spain is on a death slide effectively and it has been slow and gradual," said Stuart Ive, currency strategist at HiFX.
"The last thing the European Union want is for the situation to escalate to the bailout of Spain."
Investors' doubts about the health of the Spanish banking system helped drive up the nation's borrowing costs, with the yield on 10-year Spanish government debt climbing 3 basis points to 6.3 per cent.
The New Zealand dollar was little changed at 60.11 euro cents from 60.17 cents on Thursday as uncertainty about Greece's fiscal and political situation continued.
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.
Leaders of the Group of Eight nations will meet near Washington DC this weekend and are expected to discuss how to deal with Greece, as well as economic growth in the US, China and Japan.
The New Zealand dollar was little changed at 77.09 Australian cents from 77.03 cents on Thursday. It rose to 48.33 British pence from 48.17 pence, and was little changed at 60.47 yen from 61.54 yen.
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