The New Zealand dollar bounced up after the Reserve Bank delivered no change to interest rates, as expected, and a probable delay to any rate cut.
By 5pm, the kiwi was at US80.26c, holding onto the day's gains and above yesterday's local close of US79.84c.
The currency hadearlier hit an overnight low of US79.26c on the back of weaker US equity markets. Just before the RBNZ decision at 9am, it traded around US79.70c before quickly rising to US80.20c.
"The statement was close to what we were expecting but probably a little more hawkish than what the broader market expected, in the sense that it ruled out rate cuts any time within the next year or so," said Westpac currency strategist Michael Gordon.
RBNZ governor Alan Bollard left the Official Cash Rate at 8.25 per cent in the bank's quarterly Monetary Policy Statement, and indicated that interest rates were not likely to start falling until the second half of next year.
The view on the kiwi had not changed, with US dollar weakness and the slowing US economy remaining key drivers, Mr Gordon said.
Against the Australian dollar, the kiwi fell to A85.89c from A86.08c late yesterday afternoon. It was little changed at 0.5255 euro and 40.33 pence, and rose to 83.43 yen from 82.51 yesterday.
The kiwi was at 72.08 on the trade weighted index, from Wednesday's 71.86.
The US dollar stuck near a record low against the euro, as data showing a fall in US private sector employment and a contraction in the service sector reinforced worries of a US recession.
The data also raised concerns that US jobs figures tomorrow could also come in below market expectations.
CURRENCY RATES AT 5PM
Wellington, March 6 NZPA - Reuters currency rates:
