NZ dollar pares gain as investors sell into risk rally

The kiwi was little changed at 84.15 US cents at 8am in Wellington from 84.13 cents at 5pm yesterday.

The New Zealand dollar pared gains in local trading after an upbeat Northern Hemisphere session when equity markets rallied and fears over tensions in Ukraine eased.

The kiwi fell to 83.30 US cents at 5pm in Wellington from 83.88 cents at 8am, though still up from 82.77 cents yesterday. The trade-weighted index rose to 78.18 from 77.76 yesterday.

Investors took advantage of last night's gains, taking profit from the rally in the kiwi after stocks on Wall Street gained spurring demand for risk-sensitive currencies. Those gains were underpinned by expectations Ukraine will be able to attract international aid after lawmakers ousted President Viktor Yanukovych to quell the prospect of a civil war.

"There was a bit of a risk-on environment overnight helped by the Ukraine situation seeming to calm down," said Michael Johnston, senior trader at HiFX in Auckland. "The equities rally helped pull up commodity currencies such as the kiwi and Aussie, and people have been selling into it."

HiFX's Johnston said the currency will probably stay in its recent range between 82.60 US cents and 83.50 cents.

The kiwi rose to a three-month high 5.1047 Chinese yuan, trading at 5.0893 yuan at 5pm from 5.0436 yuan yesterday after China's currency dropped on speculation the People's Bank of China wants to end its steady appreciation ahead of a possible widening of the band, according to a Bloomberg report.

China's Shanghai Composite Index extended yesterday's decline, down 1.8 percent in afternoon trading, led by property stocks amid speculation lending curbs will slow down the economy.

HiFX's Johnston said the potential slowdown will have more of an impact on the Australian dollar than the kiwi, as it's often seen as a proxy for investors to get exposure to China. The kiwi traded at 92.28 Australian cents at 5pm in Wellington from 92.34 cents yesterday.

The local currency gained to 85.38 yen from 84.63 yen yesterday, and gained to 60.65 euro cents from 60.25 cents. It rose to 49.99 British pence from 49.74 pence yesterday.