The New Zealand dollar has come a long way since the world equities meltdown in August.
The currency traded yesterday at US68.2c - up US6.2c or 10 per cent - from an intraday low of US62c in late August, when share markets were in freefall over concerns about China's growth prospects.
At the time the kiwi, which is seen as a "risky" currency relative to the major safe haven currencies, came under selling pressure as investors quickly turned risk averse.
Now, the currency has enjoyed a return to favour, supported by renewed weakness in the US dollar as prospects of a rate hike from the US Federal Reserve start to look more remote.
"I think it's been about a change in global investor sentiment," said Raiko Shareef, currency strategist at Bank of New Zealand. "Investors seem to have taken a glass-half-full approach to the world today," Shareef said. "Instead of being worried about weakness in global growth, investors are more comforted by the fact that it seems that US rates are going to stay low for a bit longer."
US dollar selling has become more prevalent in recent days as investors became more convinced the Fed would start its long awaited monetary tightening cycle early next year, rather than late this year.
The kiwi has also been stronger on the cross rates, most notably against the Australian dollar, trading at A93.1c - its highest point since early June.
Sam Tuck, senior foreign exchange strategist at ANZ Bank, said the kiwi had come a long way in a short space of time. "The kiwi has climbed off those lows, but it's potentially come a bit far, too fast," Tuck said.
Analysts said the currency was reflecting better news on the domestic front - notably a big bounce in dairy prices - and easing concerns about China's economic growth prospects.
On the domestic front, whole milk powder prices, which are key to determining Fonterra's farm gate milk price, have rallied by 89.5 per cent since hitting a low of US$1490 a tonne in August.