KEY POINTS:
The New Zealand dollar held most of its gains today, 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 today.
The kiwi closed slightly below its opening but ended the session on US71.25c, slightly up on yesterday'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 New Zealand posting a worse than expected $791 million trade deficit in July.
Economists had forecast a $535m shortfall on average.
Although there have been generally easing concerns about the global credit crunch, news 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 yesterday while the trade-weighted index fell to 68.83 from 68.91.
In the major currencies, news Bank of America would 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.
Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US71.25c US71.20c
NZ dlr/Aust dlr A86.88c A87.46c
NZ dlr/euro 0.5251 0.5255
NZ dlr/yen 82.74 82.56
NZ dlr/stg 35.54p 35.68p
NZ TWI 68.83 68.91
Australian dollar US82.04c US81.47c
Euro/US dollar 1.3566 1.3551
US dollar/yen 116.17 115.87
- NZPA
