KEY POINTS:
The New Zealand dollar bounded back over US77c against a US dollar emaciated by concern about US finance houses, the housing market and the economy.
The kiwi strenthened despite speculation the Reserve Bank could cut interest rates as early as next week.
It closed on its US77.15c opening,
which compared with US76.58c at the same time yesterday.
A NZ said it was "a wild day and a wilder night as the New Zealand dollar punched higher once the key downtrend resistance channel was obliterated".
The US dollar slid to a record low against the euro with a sharp drop in oil prices helping to temporarily offset the mounting gloom over the financial sector.
Fears are near fever pitch following the US government's forced rescue plan for mortgage lending giants Fannie Mae and Freddie Mac.
In addition, Federal Reserve Chairman Ben Bernanke did the dollar no favour when he said that restoring stability to the hard-hit financial sector was his top priority, suggesting that any potential interest rate hikes to contain inflation won't be coming soon.
But the dollar came off its lows against the euro and the yen as crude oil's biggest price plunge since the 1991 Gulf War briefly shifted investors' attention away from troubles in the US financial sector and economy.
"Bernanke placed top priority in returning the US financial sector back to normal, which further pushed back rate hike expectations," said Hideaki Inoue, chief manager of forex trading at Mitsubishi UFJ Trust Bank.
The aussie backed away from a 25-year peak of US98.51c after Reserve Bank of Australia governor Glenn Stevens indicated the central bank was more confident that tighter monetary policy had helped to slow domestic demand and curb inflation.
Mr Stevens acknowledged that independent hikes of home loan rates by the commercial banks had added to tighter finance conditions, particularly in the past month.
The kiwi was buying A78.92c Australian dollars at the close, just up from yesterday's close of US78.54c.
The trade weighted index lifted to 68.00 from 67.45.
Reuters currency rates:
NZ dlr/US dlr US77.15c US76.58c
NZ dlr/Aust dlr A78.92c A78.54c
NZ dlr/euro 0.4851 0.4805
NZ dlr/yen 80.64 81.07
NZ dlr/stg 38.51p 38.33p
NZ TWI 68.00 67.64
Australian dollar US97.79c US97.51c
Euro/US dollar 1.5907 1.5938
US dollar/yen 104.56 105.84
- NZPA