The New Zealand dollar lost over half a US cent today as the US dollar rallied to a 27-month peak against the yen and topped a two-year peak against the euro.
Reserve Bank Governor Alan Bollard helped the kiwi down with comments that the bank's main weapon, controlling interest rates, was losing its edge due to borrowers being offered fixed-term loans.
At 5pm the kiwi was buying US68.14c compared with US68.72c at yesterday's local close.
The US dollar returned to favour as investors bet that US interest rates will remain more attractive than in Europe or Japan.
The yen came under pressure in the wake of Japanese Prime Minister Junichiro Koizumi's rare direct comment on central bank policy, saying it was too early for the Bank of Japan to end its ultra-loose "quantitative easing" policy.
Mr Koizumi's comments added to a chorus of government officials calling for the BOJ to work with the government in fighting deflation.
Locally, data showed the the value of retail sales grew 2.4 per cent in the September quarter on the previous quarter. Car sales fell sharply in the month of September. Economists said that there was still momentum in the core retail sales which should under interest rates.
New Zealand's official interest rate is currently the highest in the industrialised world, at 7 per cent, but investors are starting to consider other matters like the beating the high exchange rate has given the country's export sector.
The annual current account deficit hit 8 per cent of gross domestic product in the second quarter and is still widening.
Labour pressures remain strong, however -- compounding expectations of another interest rate hike here next month.
The Australian dollar closed at US72.82c, down from US73.35c yesterday, while the cross rate fell to A93.52c from A93.67c.
- NZPA
<EM>Currency:</EM> Kiwi dips as US dollar regains strength
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