The New Zealand dollar fought back today, gaining almost US1c after slipping below US60c yesterday.
Around 5pm today it was worth US60.82c, having been as high as US60.90c from US60.41c at 8am. Yesterday it hit 22-month lows and at 5pm had been at US59.95c.
Today's strengthening also saw the kiwi back above 71 yen, after hitting an 18-month low against the Japanese currency of around 70.40 yen.
The improvement came as investors consolidated positions but traders said the rally was likely to be temporary.
This month the kiwi lost more than 9 per cent against the greenback, the biggest monthly decline in 20 years.
The TWI also strengthened during the day, reaching 62.97 at 5pm, having been at 62.34 24 hours earlier and starting the day at 62.79.
Today a Bank of New Zealand economist raised concerns about the weakness of the TWI, saying it was already 7 per cent below the June quarter average assumed in the Reserve Bank's monetary policy statement earlier this month.
Further slippage was expected, and even where it was now the lower New Zealand dollar would be putting substantial upward pressure on inflation forecasts, economist Craig Ebert said in a commentary.
The plunge of the New Zealand dollar in recent months must be boosting growth and inflation expectations.
The markets seemed to be pre-occupied with historical weak-looking headline GDP results, without any regard for what was being revealed about capacity constraints, he said.
The Reserve Bank must be finding the fall in the currency uncomfortable, just when it had seemed to be getting on top of inflation pressures.
The fall was not conducive to cutting the official cash rate anytime soon, and the BNZ remained comfortable in calling for the first rate cut to happen in December.
The following are Reuters currency rates:
5pm today 5pm Wednesday
NZ dlr US60.82c US59.95c
NZ dlr/Aust dlr A85.62 A85.41c
NZ dlr/euro 0.5037 0.4996
NZ dlr/yen 71.70 70.67
NZ dlr/stg 34.94p 34.40p
NZ TWI 62.97 62.34
Australian dollar US71.02c US70.21c
Euro/US dollar US1.2072 US1.2001
US dollar/yen 117.58 117.86
- NZPA
<EM>Currency:</EM> Gains nearly US1C from 22-month low
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