Investing.com - The euro fell to its lowest level in 13 months against the New Zealand dollar on Thursday after the Reserve Bank of New Zealand raised interest rates for the third time this year, highlighting the diverging monetary policy stance between the euro zone and its major peers.
EUR/NZD fell to lows of 1.5586, the weakest since mid-May 2013 and was last down 1.47% to 1.5614.
The pair was likely to find support at 1.5475 and resistance at 1.5725.
The New Zealand dollar rallied after the RBNZ raised its benchmark interest rate to a five-year high of 3.25% from 3.00% and indicated that borrowing costs would rise again as strong economic growth fuels inflation pressures.
"The speed and extent to which the OCR (official cash rate) will need to rise will depend on the future economic and financial data, and its implications for inflationary pressures," RBNZ Governor Graeme Wheeler said in a statement.
In contrast, the European Central Bank cut all its main rates to record lows last Thursday and for the first time imposed negative deposit rates on commercial lenders, in a bid to stave off the risk of deflation in the euro zone.
As a result, the euro has weakened broadly as euro zone bonds rallied in recent sessions, widening the yield gap between euro zone sovereign bonds and their major counterparts.
Elsewhere, the euro fell to fresh one-and-a-half year lows against the pound, with EUR/GBP down 0.20% to 0.8043, the weakest level since December 2012.
Demand for the pound continued to be underpinned after upbeat U.K. employment data on Wednesday indicated that the economic recovery is continuing to gain momentum, bolstering expectations that the Bank of England will raise interest rates sooner than expected.
EUR/USD was steady at 1.3533, not far from the four-month low of 1.3502 set last Thursday, while EUR/JPY was at 138.12, after falling to lows of 137.86 on Wednesday, the weakest since February.
Market participants were looking ahead U.S. data on jobless claims and retail sales later in the trading day, after recent economic reports indicated that the economy is shaking off the effects of the severe winter.