The New Zealand dollar surged higher above US78c in afternoon trading after earlier being subject to profit-taking.
The NZ dollar was at US78.22c at 5pm, from US77.84c at 8am and US77.61c at 5pm yesterday. It rose to US78.33c in late afternoon trading.
"I think it has been a thin andilliquid market this afternoon and the price action has been favouring the high yielding currencies," said Daniel Bell, senior dealer at HiFX.
The NZ dollar had eased to US77.59c earlier in the session.
"There have been no announcements today so this has all just been position taking in a thin market, and both the kiwi and aussie are benefiting from a weaker US dollar," Mr Bell said.
A standoff in the US budget was a focus. That should cause risk aversion, but traders were ignoring it at the moment.
The NZ dollar was little changed at A74.29c at 5pm from A74.44c at 8am and A74.20c at 5pm yesterday.
The yen fell to an 11-month low against the euro and was near a six-month low against the US dollar as investors continued to expect easy monetary conditions to help the Japanese economy recover.
The NZ dollar was little changed at 0.5436 euro at 5pm from 0.5441 euro at 8am and 0.5425 at 5pm yesterday. The European Central Bank raised interest rates overnight for the first time since the 2008 financial crisis.
The ECB lifted rates by 25 basis points, with ECB chief Jean-Claude Trichet signalling the bank was ready to tighten policy further if needed but added that the ECB had not decided if the move was the first in a series.
The trade weighted index lifted to 68.13 from 67.83 yesterday.
