Concerted G7 intervention to aid the euro saw the New Zealand dollar rally well over half a US cent yesterday, but it tailed off to close on its lows.
The kiwi finished at US41.20c (40.86c on Friday), from a session high of US41.51c.
A currency dealer said the local market had better liquidity and the kiwi could well push on during the European and American sessions.
He saw it supported at US40.80c overnight and possibly heading for US43c-44c over the next few weeks.
But all eyes are on euro intervention, sparked by a G7 meeting on the weekend which surprised many with its resolve to help support an ever-softer euro which has stoked inflation fears in Euroland and threatens world economic growth.
The New Zealand and Australian dollars have tended to follow the euro as it struggles with overwhelming greenback dominance.
The euro hit a high of US90.40c as the European Central Bank, the Bank of Japan and the US Federal Reserve bought it, but it was down to US88.17c by the local close.
While the volatile euro will set the primary direction, the big news locally this week will be June quarter gross domestic product figures on Friday, which are expected to show a 0.5 per cent contraction in growth.
Preliminary merchandise trade figures for August will be released today, and June year labour cost data is due on Thursday.
While Friday will see the historical June quarter growth data it will also signpost the future outlook with the National Bank business confidence survey for September.
Global investors currently seek growing economies. New Zealand's relatively poor situation is another reason the kiwi has had few takers.
Rumours of buying yesterday from the Reserve Bank of Australia saw the aussie close steady at US54.63.
"It was driven back after Aussie/yen came off sharply during the day and the euro/yen was sold ... that caught the interbank market a little long," Glen Bull, strategist at Standard and Poor's MMS in Australia, said.
On the crosses, the kiwi was at A75.54c (A74.79c), 44.45 yen (43.70), 28.23 pence (28.42), 0.9167 marks (0.9284), 0.7129 Swiss francs (0.7201), and 0.4687 euro (0.4747).
With the 90-day bills flat at 6.65 per cent the monetary conditions index tightened to minus 944 (minus 966).
- NZPA
<i>Currency:</i> All eyes on euro intervention
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