The New Zealand dollar was rangebound against the greenback today but sharply down against a resurgent yen.
The kiwi eased to US70.64c at the close from US70.76c yesterday and fell to 82.91 yen from 84.13 yesterday.
The US reporting of a record monthly trade deficit of US$68.9 billion ($98.66 billion) was the trigger for the yen move.
Short covering boosted the yen to its steepest one-day rise in 3-1/2-years - the US dollar falling to 117.27 yen from 118.93 at yesterday's local close.
Traders said selling of the US dollar against the yen had prompted the unwinding of "carry trades" where players borrow in a low interest rate currency and invest in a high yielding one. Carry trading had helped to hammer the Japanese currency to eight-year lows against high yielders like the New Zealand and Australian dollars this year.
"A move like that doesn't happen for just one day," said Rick Lloyd, head of G11 currency trading at ABN Amro in Sydney.
"There seems to be a liquidation of the carry trade and people taking riskier trades off the table."
The Canadian dollar and British pound had their largest one-day falls against the resurgent yen in seven years.
With near-zero interest rates in Japan, investors had been borrowing the yen for almost no cost and selling it to buy higher-yielding currencies in the carry trade.
The US dollar's rot started to set in after the Federal Reserve tweaked the wording of its policy statement on Tuesday, suggesting to many in the market that the central bank's 18-month campaign of credit tightening was nearing an end.
Widening US interest rates have been key to the US dollar's rally this year, helping suppress concerns about the huge trade deficit that had hurt the currency for three years to the end of 2004.
Rates:
5pm today 5pm Wednesday
NZ dlr/US dlr US70.64 US70.76
NZ dlr/Aust dlr A93.60 A93.74
NZ dlr/euro 0.5897 0.5885
NZ dlr/yen 82.91 84.13
NZ dlr/stg 39.87 39.87
NZ TWI 72.34 72.57
Australian dollar US75.48c US75.47c
Euro/US dollar US1.1982 US1.2020
US dollar/yen 117.27 118.93
- NZPA
<EM>Currency:</EM> Dollar rangebound versus Greenback
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