The New Zealand dollar rose through much of the night against the greenback after earlier dropping to its lowest level in more than a week.
By 8am today the kiwi was buying US67.32c, having briefly dropped below US66c about 12 hours earlier.
BNZ Capital strategist Mike Jones said a meltdown
in Asian equities had sparked more doubts about the speed of the Asian recovery and global outlook.
Investors initially ditched growth sensitive currencies such as the NZ dollar, but after European and United States equity markets opened higher the negative sentiment quickly evaporated, Jones said.
The exchange rate against the United States currency went through a wild gyration around 6.30am after the US Federal Reserve released a statement at the conclusion of its policy-setting meeting.
The Fed is to extend the duration but not the amount of a programme to buy long-term government securities, and said the economy was showing signs of levelling out after 20 months of recession.
It also kept its benchmark short term interest rate steady near zero and said it would likely stay there for an extended period.
The NZ dollar quickly fell half a cent to US66.80c after the statement. It then raced up to US67.65c before falling away to be at roughly the same level by the local open as it was before the Fed's announcement.
The US dollar gained versus the yen and pared losses against the euro after the Fed statement.
"The (US) dollar was boosted ... as people are focusing on the somewhat more hopeful outlook," said David Watt, a senior currency strategist at RBC Capital Markets in Toronto.
But the statement also reflected some caution, with the Fed recognising the economy still had vulnerable areas.
The NZ dollar rose against the European and Japanese currencies, buying 0.4737 euro at 8am from 0.4698 at 5pm, and 64.66 yen from 63.50.
Against the Australian dollar, the kiwi was little changed at A80.70c by the local open, while the trade weighted index lifted to 62.83 at 8am from 62.24 at 5pm.
- NZPA
