Kiwi hits US51c, before bouncing back.
The New Zealand dollar fell to a six-year low and then bounced on a day in which the traders around the world watched the swearing in of a new United States president.
The sort of volatility the dollar often shows overnight was evident in its domestic session, which
opened around the time of President Barack Obama's inauguration speech.
The NZ dollar plunged as investors bet that weakness in the US share market would flow into the Asian session and affect risk-sensitive currencies.
But when the New Zealand share market posted only modest losses there was a squeeze on traders with short positions.
The NZ dollar fell as low as US51.65c today but by 5pm had recovered to US52.93c. It closed its domestic session at US53.44c on Tuesday.
"It has just been chaos here today," said Murray Hindley, ANZ Institutional Bank chief foreign exchange.
"Everything was being sold. Euro was being sold, aussie was being sold. I think the market was looking for a reaction in the equity markets after a sell-off in the Dow.
"It didn't get it and we've seen a massive short squeeze in the afternoon session," he said.
The US equity market fell to fresh lows after President Obama's speech.
President Obama failed to provide new details on measures to address the economic crisis. The US dollar fell against the yen.
The NZ dollar fell to its lowest level against the yen in more than seven years, dropping to 46.98 yen at 8am from 48.26 yen at 5pm yesterday. It was 47.60 yen by 5pm today. Against the euro the kiwi was 0.4075 from 0.4104 yesterday.
The kiwi was little changed against the Australian dollar to A80.70c at 5pm from A80.59c yesterday, having recovered earlier weakness. The trade weighted index was 53.32 at 5pm from 53.64 yesterday.
- NZPA
