The New Zealand dollar rose from overnight lows ahead of inflation data out of China, even as equity markets turned down in response to weak Chinese trade data and a disappointing profit report from JP Morgan Chase, the second-largest US bank.
The kiwi dollar recently traded at 79.61 US cents at 8am, up from the 79.30 US cents at 5pm yesterday. It recovered from a dip below 79 US cents in overnight trading.
Stuart Ive, senior trader at HiFX, said the focus today is on consumer price index data for September from China at 2.30pm New Zealand time.
"Anything too much over 6.1 per cent will ring alarm bells that China might tighten monetary policy," he said.
News yesterday of a narrowing in China's trade surplus in September, due to both imports and exports being lower than expected, suggested cooling domestic and global economic demand.
The impact of the European sovereign debt crisis on European economies is starting to come through in data. China's exports to Europe slumped 9.8 per cent.
JPMorgan said profits were hurt as the European debt crisis pushed investment banking clients to the sidelines.
The Slovak government has endorsed the 440 billion-euro bailout European Financial Stability Facility, removing one source of uncertainty for traders this week.
The euro has declined from one-month highs on renewed worries after the JP Morgan report and Chinese trade data.
Analysts expected the kiwi to drift back from a big move higher in trans-Tasman currencies in London trading on Wednesday night. That move took the kiwi to a three-week high and the Australian dollar back above parity with the greenback.
That came as China's yuan fell to the lower limit of its trading band against the greenback, prompting speculation the world's second biggest economy was dumping its US dollar holdings. The kiwi dollar rose 1.8 per cent to 5.0602 Chinese yuan.
"That was just a monstrous move," said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional.
"I don't think there's much more" left in the rally, he said.
The Australian dollar was at US$1.0207 after rising to US$1.0187 from 99.04 US cents yesterday after strong employment data.
The kiwi rose to 77.96 Australian cents from 77.85 cents yesterday and to 61.19 yen from 61.11 yen. It gained to 57.69 euro cents from 57.53 euro cents yesterday and rose to 50.46 British pence from 50.37 pence yesterday.
The trade-weighted index rose to 69.74 from 69.64 yesterday.