KEY POINTS:
The New Zealand dollar recovered steadily in a fairly quiet session, getting a boost from a stronger Australian dollar on the back of employment data across the Tasman.
By 5pm, the kiwi was at US78.55c from US79.05c late yesterday afternoon, and 1 US cent below yesterday's week-high. However, it had earlier fallen to US78.20c.
"It got something of a boost after the Australian employment figures, which were reasonably strong, again, and gave people a little bit more confidence about the growth picture in the part of the world," Westpac currency strategist Michael Gordon said.
News that Australia's unemployment rate fell to 4.1 per cent in January from 4.3 per cent in December boosted the Aussie back up above US90c, pushing the kiwi down on the cross rate to A87.09c from A87.40c late yesterday.
The data also pushed the yield spread between Australian and US two-year government bonds to 500 basis points, their widest in more than a decade, as expectations grew of a further Reserve Bank of Australia rate rise.
Markets were looking ahead to comments from US Federal Reserve Chairman Ben Bernanke later on Thursday, on the state of the US economy and financial markets.
The Fed has slashed rates to 3 per cent from 5.25 per cent in the last five months in its bid to prevent a deeper economic slump.
"If he strikes a slightly more upbeat tone, I think you could see the US dollar rise quite quickly and that would see the kiwi dollar lower. If he strikes a more cautious tone when he speaks, probably more just business as usual (for the kiwi)," Mr Gordon said.
The kiwi was weaker against the euro and sterling, but gained against the Japanese yen.
The US dollar was little changed near a one-month high against the yen after surprisingly strong US retail sales data eased some concerns that the US economy is falling into a recession.
On Wednesday, the dollar and higher-yielding currencies got a boost from data showing US retail sales rose 0.3 per cent in January, contrary to Wall Street forecasts for a slight drop.
- NZPA