KEY POINTS:
A dip in the currency, caused by comments by Finance Minister Michael Cullen that he was considering a levy on mortgages to drive down inflation, proved short-lived today.
As other political parties and economists knocked the concept as a non-starter, the Kiwi recovered the lost ground.
It closed the week on US68.63c after starting the day on US68.67c before sliding to around US68.40c on Dr Cullen's comments. It closed yesterday on US68.75c.
BNZ currency strategist Danica Hampton said the levy idea caused the currency markets to consider the possibility the housing market could be contained without the Reserve Bank having to hike rates, she said.
But it was important to realise Treasury and the Reserve Bank had been talking about the idea for the past year, and any such measures would take some time to implement, she said.
Probably some offshore players in the currency market had put more weight on the comments, while their local counterparts were somewhat bemused.
Dr Cullen's comments were probably "a little bit more jawboning" and while it caused some volatility in the currency, any sustained weakness was unlikely.
Against the Australian dollar, the Kiwi ended on A87.94 from A88.08c at 5pm yesterday while the aussie was unchanged against the US dollar at US78.06c.
The kiwi was mixed on other crosses and the trade weighted index closed on 68.23 from 68.30.
In major currency action, the yen closed in on a four-year low against the dollar and a record trough versus the euro before a Group of Seven finance ministers' meeting is unlikely to seriously tackle the yen's weakness.
The euro also drew support from comments from ECB President Jean-Claude Trichet, who signalled yesterday rates could rise in March and possibly later on in the year. The ECB left rates unchanged at 3.5 per cent in the previous session.
Market were focussing on the statement that will follow the two-day G7 gathering, which starts in Essen, Germany, later in the day. Some investors were also selling the yen ahead of a market holiday in Japan on Monday.
"The market is betting that the yen won't be included in the communique, which is why we're seeing buying in currencies against the yen," said a forex trader at a European investment bank.
Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US68.63c US68.75c
NZ dlr/Aust dlr A87.94c A88.08c
NZ dlr/euro 0.5264 0.5280
NZ dlr/yen 83.25 83.12
NZ dlr/stg 35.03p 34.88p
NZ TWI 68.23 68.30
Australian dollar US78.06c US78.06c
Euro/US dollar 1.3039 1.3016
US dollar/yen 121.28 120.87
- NZPA