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WELLINGTON - The New Zealand dollar bounced off a two-month low overnight, supported by strong equity markets which made riskier currencies more attractive.

The kiwi dollar closed near its session highs today at US78.82c, not far from yesterday's close of US78.63c.

But overnight it dipped to US77.82c a s the US dollar held its gains on better than expected manufacturing data and hopes that the worst of the credit crisis may have passed.

"Obviously a strong recovery in the Dow overnight was a catalyst for covering of short kiwi positions that were put in place over the last couple of days," senior ANZ Investment Bank dealer Mark Elliott said.
The kiwi also crept up against the Australian dollar after a central bank decision yesterday to hold interest rates and cut expectations of a further rise.

The kiwi traded in a tight range but closed at A86.73c from US86.26c yesterday.

It also strengthened against the yen on yield demand, up to 80.25 yen versus 78.52 yen yesterday, and against the euro at 0.5053 from 0.4984 yesterday.

The trade weighted index rose to 70.58 from 70.25 at yesterday's close.
Mr Elliott said the kiwi dollar was likely to go higher overnight, with a resistance around US79.10c.

"Despite all the negatives happening here anecdotally, the currency's still in an uptrend."