The New Zealand dollar fell to two-week lows against the major currencies, and dropped to its lowest level against the Australian currency in nearly 10 months, before climbing out of the hole.
BNZ strategist Mike Jones said a softer greenback had provided a base for a small recovery in the
New Zealand dollar against the United States currency.
Federal Reserve chairman Ben Bernanke was in focus as he offered a relatively downbeat assessment of the US economy to Congress, Mr Jones said.
He also "rammed home the idea" that Federal Reserve policy tightening was still not on the cards.
The prospect of lower US rates for longer saw equity markets post modest gains and commodity prices rise.
The combination of a weaker US dollar, and gains in equities and commodity prices should have provided the perfect backdrop for NZ dollar strength, said Jones.
Instead the NZ dollar had really just meandered up to around US69.40c, underperforming its peers. Once again, it was weakness in the NZ dollar against the aussie that held further gains in the kiwi against the greenback.
A noted Reserve Bank of Australia (RBA) watcher was saying yesterday it would almost certainly raise interest rates 25 basis points next week. As a result the NZ dollar dribbled lower against the aussie through much of the night.
The kiwi dropped as low as US68.66c overnight, according to Reuters data, but by 8am was back up to US69.38c, only slightly lower than the US69.45c at 5pm yesterday.
The kiwi also dropped to 0.5078 euro before climbing back to 0.5121 at the local open, slightly down on its 5pm level. The picture was similar against the Japanese currency, with the kiwi dropping to 61.79 yen before lifting to 62.58 by 8am.
Against the Australian dollar the kiwi fell to A77.37c, but by the local open was back to A77.61c, a little down on the A77.73c at 5pm. The trade weighted index dropped to 64.41 at 8am from 64.50 at yesterday's local close.
- NZPA
