KEY POINTS:
The New Zealand dollar hit new multi-month lows against the euro and Australian dollar today but found enough support to climb out of the troughs.
Investors in kiwi dollars were torn between concern about the deteriorating economy and a reduction in concern about risky assets.
"Investors are gradually starting to put on risk-taking positions because the credit crunch seems to be receding," said Akira Kato, senior manager for Bank of Tokyo-Mitsubishi UFJ's foreign exchange trading department.
On world markets, the euro pulled back from a record high against the greenback in choppy trade after a top euro zone official said recent appreciation in the single currency was undesirable.
The euro had soared to a record just shy of US$1.60 before retreating when Eurogroup head Jean-Claude Juncker complained about euro strength against the US dollar.
He also said markets misunderstood a statement last weekend by the Group of Seven rich countries that voiced concern over sharp fluctuations in major currencies.
The NZ dollar fell to an eight-month low around 0.4925 against the euro before recovering at the close to 0.4974, slightly above yesterday's 0.4960 close.
Against the Australian dollar the kiwi fell to a five-month low around A83.85c, lifting to A84.44c by the close, which was also above yesterday's A84.31c local close.
Against the greenback, the NZ dollar recovered to US79.10c from its US78,81c opening and compared with US79.06c at 5pm yesterday. The trade weighted index ended on 70.10 from 70.02 yesterday.
Bank of New Zealand currency strategist Danica Hampton said an increasing number of market participants were talking about a recession, which had encouraged the selling of NZ dollar crosses.
Selling the kiwi against the euro had been popular during the past week, she said.
The hawkish rhetoric that continued to be espoused by European Central Bank officials sharply contrasted with the New Zealand economic picture where interest rates could be lowered before the year was out, even though the Reserve Bank is expected to maintain its hawkish tone at next week's cash rate review.
No economists expect the bank to cut rates or indicate a rate cut in the near future.
Reuters currency rates:
NZ dlr/US dlr US79.10c US79.06
NZ dlr/Aust dlr A84.44c A84.31c
NZ dlr/euro 0.4974 0.4960
NZ dlr/yen 80.99 80.60
NZ dlr/stg 39.74p 40.09p
NZ TWI 70.10 70.02
Australian dollar US93.68c US93.75c
Euro/US dollar 1.5895 1.5928
US dollar/yen 102.40 101.92
- NZPA
