The New Zealand dollar rallied along with most other currencies as plunging stock markets in the United States spurred loss-covering sales of US dollar positions.
The kiwi was trading at 66.98 US cents at 8.30am in Wellington from 66.24 cents at 5pm yesterday. The trade-weighted index rose to 73.18 from 72.61 yesterday.
"Yesterday's action in the currency was pretty violent and we've seen a retracement overnight and a big sell-off of US dollars," says Tim Kelleher, head of external foreign exchange sales at ASB Bank.
The currency has traded in a huge range against the greenback, between 65.88 US cents overnight Wednesday and 67.50 cents yesterday.
That reflected a combination of worrying news from Apple Inc. blaming a December slowdown in sales on a slowing Chinese economy to Chinese sabre-rattling over Taiwan, ongoing Brexit concerns and the failure of US legislators to end a partial government shutdown now about to end its second week.
This led to plunging stocks in the US again, the broad measure of that market, with the S&P 500 Index currently down about 1.5 per cent and the iconic Dow Jones Index and tech-heavy Nasdaq both off about 2 per cent.
"All the market's been doing for the last three or four months has been long US dollars and short everything else," Kelleher said.
That's been underpinned by rising US interest rates – the US Federal Reserve's fed funds rate now sits at 2.25-to-2.5 per cent compared with the Reserve Bank of New Zealand's official cash rate of 1.75 per cent.
Given what's happening in the US equities markets overnight, traders have been unwinding "stale" US dollar positions to cover losses in equities, Kelleher says.
Fears that the Apple sales warning points to a slowing global economy are fuelling the current sell-off on Wall Street: 10 out of 11 sub-indices within the S&P 500 are in negative territory with technology stocks leading the way down.
Kevin Hasset, chair of the White House's council of economic advisers, added fuel to the fire, saying there's more pain to come before the US and China settle their trade differences.
"It's not going to be just Apple," Hassett told CNN. "There are a heck of a lot of US companies that have sales in China that are going to be watching their earnings being downgraded" until the two nations reach a trade deal.
US companies will start reporting December quarter earnings later this month.
While most currencies have gained against the US dollar, the New Zealand dollar rose against other currencies. It is trading at 95.55 Australian cents from 95.22 last night, at 72.24 yen from 70.98, at 53.01 British pence from 52.77, at 58.73 euro from 58.29, and at 4.600 Chinese yuan from 4.555.