KEY POINTS:
As if to prove that currency forecasting is an inexact science, the kiwi defied predictions of a further rise and fell from its record highs yesterday.
But currency strategists say the New Zealand dollar's upwards trend remains intact.
The kiwi dipped under US74c yesterday but closed at US74.02c - over a cent lower than Wednesday's post-float high of US74.93c.
ANZ senior dealer Murray Hindley said the currency was dragged lower after a fall in Asian share markets sparked nervousness among investors.
Shares on the Shanghai Composite Index fell as much as 3.3 per cent, and by early evening New Zealand time the Nikkei 225 was down 1.7 per cent and Hong Kong's Hang Seng index was down 2 per cent.
Hindley said the falls had seen some investors unwind their carry trades - where investors borrow low interest currencies such as the yen, then put those funds into higher yielding but possibly riskier investments, such as the kiwi dollar.
"It's been a really busy day today," he said. "There's been a little bit of profit-taking on the carry trade."
The kiwi hit its highs on Wednesday due to continuing negative investor sentiment about the US dollar and local inflation data showing that Reserve Bank Governor Alan Bollard might increase interest rates next Thursday in another attempt to cool the economy.
Westpac currency strategist Michael Gordon said as long as investors remained bearish on the US dollar, the kiwi could continue to rise.
He said the fall in the Asian stock markets had reminded investors about the 9 per cent fall in the Shanghai stock market in February.
