The New Zealand dollar gained against the greenback after US legislators managed to broker a deal to end a federal government shutdown.
The kiwi rose as high as 73.55 US cents and traded at 73.22 cents as at 5pm in Wellington from 72.81 cents yesterday. The trade-weighted index advanced to 75.21 from 74.85.
The US House of Representatives passed a short-term measure on Monday to fund the federal government through Feb. 8 after the bill won enough support in the Senate, bolstering risk-sensitive currencies such as the kiwi and Aussie.
However, the Antipodean pair shed ground on what may be trade-related jitters when US President Donald Trump slapped steep tariffs on imported washing machines and solar panels on Monday in what Reuters said was the first of several potential trade restrictions. While the tariffs don't impact goods from either country, both are heavily reliant on foreign trade.
Tim Kelleher, head of institutional foreign exchange sales at ASB Bank, also said the kiwi is looking very stretched at these levels. "The 73.50 US cents to 74.00 US cents is a sell zone. It is looking pretty stretched on the charts and it has some heavy resistance up there technically," he said.
The kiwi has support at 72.50 US cents, and unless it breaks below that level Kelleher said he expects the current uptrend to stay intact.
Overall, Kelleher said there is no fundamental reason for the US dollar to be weak: "It was weak when the US government closed down and weak when it opened. It just doesn't line up with fundamentals at all."
He expects the US dollar to move sharply higher at some point, saying "while the momentum is going that way, the turn will be nasty and inevitable. For now, you can't stay in the way of the train."
There was little or no market reaction when the Bank of Japan left its policy and forecasts unchanged. The local currency rose to 81.10 yen from 80.64 yen yesterday.
Looking ahead, Kelleher said the key event for the kiwi this week will be fourth-quarter inflation data on Thursday. Economists expect the consumers price index rose 0.4 per cent in the three months ended December 31, for an annual increase of 1.9 per cent, according to the median in a poll of 13 economists surveyed by Bloomberg.
The kiwi increased to 91.66 Australian cents from 91.08 cents yesterday and gained to 4.6842 Chinese yuan from 4.6628 yuan. It traded at 52.36 British pence from 52.48 pence yesterday and rose to 59.73 euro cents from 59.52 cents.
New Zealand's two-year swap rate fell 6 basis points to 2.23 per cent while the 10-year swaps were unchanged at 3.29 percent.