The kiwi jumped back above US80c today after the Federal Reserve last night announced a huge emergency injection to boost banking system liquidity and alleviate credit concerns.
The Fed's move sent Wall Street stocks soaring over 3 per cent and the kiwi coat-tailed a general move back intoassets perceived as riskier.
The Fed said it would lend primary dealers up to US$200 billion ($253 billion) in Treasury securities and allow them to use agency and mortgage debt as collateral.
The move reduced fear of recession.
The kiwi rose from a 3-1/2 week low of US78.80c against the greenback mid-morning yesterday to move up strongly against the US currency. By 5pm today it was buying US80.35c compared with US79.00c yesterday.
ANZ bank said yesterday's local session had brought out plenty of yield demand against the yen, then overnight the strong US dollar performance helped lift the kiwi.
Against the Australian dollar, the kiwi lifted from around A85.30c at mid-afternoon yesterday to a two-week high of A86.75c, but then eased back to A86.35c.
Very weak housing data and New Zealand's first direct fallout from the credit crisis with two funds suspending repayments, weakened kiwi sentiment.
The trade weighted index closed on 71.93 from 70.85 at 5pm yesterday.
US interest rate futures now indicate that traders see about a 60 per cent chance that the Fed will lower rates by 75 basis points next week, versus a 100 per cent chance earlier this week.
