KEY POINTS:
The NZ dollar held most of its gains yesterday, encouraged by news of a forecast monster payout for dairy farmers.
The kiwi gained 7 per cent this week, boosted by the recovery in equity markets, although the sharemarket revival rally ran out of puff yesterday.
The kiwi closed slightly below its opening but ended the session on US71.25c, slightly up on Thursday's US71.20c close.
Fonterra announced it would pay farmers $6.40/kg for milk solids, up 87c on its earlier prediction.
The increased payout will pump over $2.6 billion more in dairy farmers' pockets than they received last season.
The news was less rosy on the trade front, with NZ posting a worse-than-expected $791 million deficit in July.
Economists had forecast $535 million on average.
Although there have been generally easing concerns about the global credit crunch, news that another local finance company is on the brink of collapse brought the issue close to home.
It is the second company to signal trouble this week.
Against the Australian dollar, the kiwi ended easier on A86.88c from A87.46c on Thursday, while the trade-weighted index fell to 68.83 from 68.91.
In the major currencies, news that Bank of America will invest US$2 billion ($2.5 billion) in troubled US mortgage lender Countrywide Financial soothed credit jitters and stabilised global equities markets.
"Calmer stock markets are helping the forex market to also calm down," said Hideki Hayashi, a global strategist at Shinko Securities.
The US dollar this week staged a dramatic recovery, rebounding as much as 5 per cent from a 14-month low of 111.60 yen struck on electronic trading platform EBS late last week.
- NZPA
