The kiwi dollar shrugged off bearish sentiment to claw above US66c today, as Japanese investors re-entered the fray.
By 5pm its was buying US66.26c against last night's US65.75c local close.
The unit has been bothered all week by rumours that a Japanese securities house was advising clients not to buy New Zealand dollar-denominated bonds, which have in a large part fuelled the kiwi's rise in the past year.
Yesterday, the local unit took centre stage when it posted the biggest fall of any major currency as investors began to focus on brewing imbalances in the economy.
Currency strategist said the steep fall was an early warning that investors were now questioning why economies such as New Zealand's offered high interest rates.
Renewed demand for uridashis -- kiwi dollar bonds sold to Japanese retail investors -- underpinned the unit today.
Against the Japanese yen, the kiwi recovered from a five-month low around 77 yen to close at 77.31 yen.
But market commentators said the New Zealand dollar remained vulnerable, with a large volume of uridashis set to mature next month.
Uridashi bonds account for almost half of the total $45 billion in offshore issuance that is outstanding, more than double the previous peak in 1999.
Against the Australian dollar, the kiwi was buying A89.57c, a touch higher than last night's local close.
Rates:
5pm today 5pm yesterday
NZ dlr US66.26c US65.75c
NZ dlr/Aust dlr A89.57c A89.48c
NZ dlr/euro 0.5557 0.5527
NZ dlr/yen 77.31 77.70
NZ dlr/stg 37.82p 37.75p
NZ TWI 68.19 67.97
Australian dollar US73.98 US73.49c
Euro/US dollar US1.1925 US1.1894
US dollar/yen 116.70 118.19
- NZPA
<EM>Currency:</EM> Kiwi claws back on Japanese demand
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