KEY POINTS:
The New Zealand dollar slid back below US77c today as investors decided slowing economic growth outweighed rising appetite for risk.
The kiwi closed on US76.82c against its US77.09c opening but was still above yesterday's US76.52c close.
Bank of New Zealand currency strategist Danica Hampton said a rebound in US equities overnight and improving risk appetite had reinvigorated appetite for carry trade currencies such as the NZ dollar.
In carry trades, investors borrow against the yen or other low-yielding currency to buy assets offering higher returns.
Ms Hampton said that along with the improving appetite for risk, after four consecutive down days for the NZ dollar, many investors had been itching to lock in profits on short NZ dollar positions.
Against the Australian dollar, the kiwi continued to bump along at low levels, closing on its lowest level in more than 19 months at A81.25c. It closed yesterday on A81.66c.
The trade weighted index lifted to 68.63 from 68.56 at 5pm yesterday.
The appetite for risk was tempered by doubts about whether the credit market turmoil was really over.
"Players are unsure whether credit-related woes have really bottomed out or whether troubles will keep surfacing," said a dealer at an European bank.
"They are also not confident about a view that the dollar, which had already taken a hit from a weak US economic outlook, may be benefiting from spreading signs of a growth slowdown elsewhere," he said.
AIG, the world's largest insurer, on Monday raised US$11.9 billion ($15.62 billion) to help strengthen its balance sheet, after suffering record losses in the past two quarters driven by write-downs of derivatives linked to subprime mortgages.
"Players are not sure about investor appetite for risk, but they also seem less worried about credit market woes," a trader at a Japanese bank said.
Currency rates:
NZ dlr/US dlr US76.82c US76.52c
NZ dlr/Aust dlr A81.25c A81.66c
NZ dlr/euro 0.4948 0.4965
NZ dlr/yen 79.82 79.09
NZ dlr/stg 39.33p 39.28p
NZ TWI 68.63 69.56
Australian dollar US94.56c US93.70c
Euro/US dollar 1.5526 1.5413
US dollar/yen 103.88 103.36
- NZPA
