The New Zealand dollar flew to a 2-1/2 month high against the greenback near US77.50c overnight with the kiwi becoming the centre of attention as investors rediscovered a taste for risk.
The kiwi peaked around 6am but then fell away sharply as overnight gains in US equities also
turned negative.
By 8.20am it had pulled back to be at US76.82c, still firmly up on the US76.42c at 5pm yesterday.
The ANZ bank said the NZ dollar had easily broken through resistance levels overnight to be up against all its major trading partners on strong yield-related buying.
Despite evidence that domestic demand was softening, the market was well aware the Reserve Bank was unlikely to be cutting interest rates any time soon considering persistent inflationary pressures.
During its overnight surge, the NZ dollar had dragged the Australian dollar along for the ride, ANZ said.
The kiwi peaked against the aussie just below A85.60c and by 8.20am was at A85.36c from A85.05c at 5pm yesterday.
Against the Japanese currency, the NZ dollar hit a two-month high above 91.20 yen, but was back to 89.90 at 8.20am, from 89.62 at yesterday's local close.
The kiwi also got to 0.5446 euro, from 0.5398 at 5pm yesterday. By 8.20am it was down to 0.5414.
Analysts said expectations of more United States interest rate cuts from the Federal Reserve to shield the US economy from housing and credit market woes boosted high-yield currencies.
The Bank of Japan's decision yesterday to hold interest rates at 0.5 per cent also emboldened investors to extend carry trades, which use cheaply borrowed yen to buy higher-yielding assets, such as the NZ dollar.
Reuters currency rates:
8.20am today 5pm yesterday
NZ dlr/US dlr US76.82c US76.42c
NZ dlr/Aust dlr A85.36c A85.05c
NZ dlr/euro 0.5414 0.5398
NZ dlr/yen 89.90 89.62
NZ dlr/stg 37.79p 37.43p
NZ TWI 72.09 71.79
Australian dollar US89.93c US89.86c
Euro/US dollar 1.4185 1.4158
US dollar/yen 117.14 117.19
- NZPA
