The New Zealand dollar lost some of its gains against all currencies today following a strong run this week in the wake of high inflation data on Monday morning.
The kiwi closed on US62.24, having opened on US62.59c compared with its US62.46c close yesterday.
It peaked overnight at a five-week high of US62.80c in a classic short squeeze but traders found it irresistible to take profits.
It also slipped back against the Australian dollar, ending on US83.49c compared with its A83.88c opening and A83.35c close yesterday evening.
Similarly, against the euro, when the kiwi briefly traded above 0.50, it closed down at 0.4980 compared with 0.4986 yesterday.
The TWI ended on 63.05 from 63.18 yesterday.
The kiwi has been underpinned this week by fears the Reserve Bank may have to hike interest rates again this year to contain inflation, despite saying the tightening cycle had run its course.
The US dollar hovered near three-month highs against the euro and the yen before comments from Federal Reserve Chairman Ben Bernanke that may provide clues about whether US interest rates will keep rising.
The market was also awaiting US consumer price data for June to see if inflation risks could prompt the Fed to raise rates again, after data today showed a hefty rise in producer prices in the same month.
Traders said bubbling expectations that the Fed could lift rates for an 18th straight time to 5.5 per cent in August would keep supporting the dollar, along with flows into the currency.
Dealers said that the ongoing conflict between Israel and Lebanon-based Hizbollah has prompted US investors to shift overseas assets back into the US dollar, keeping the currency well supported.
The Japanese yen has fallen more than 3.5 per cent against the dollar since the start of last week, brushing off the Bank of Japan's first rate rise in six years to 0.25 per cent on Friday.
Despite an end to the BOJ's zero-rate policy, which had driven Japanese investors to higher-yielding assets overseas, the central bank emphasised that rates would rise slowly, suggesting that domestic rates have a long way yet to catch up to those in the United States.
Meanwhile, the European Central Bank is poised to boost rates to 3 per cent next month. European rates have risen from 2 per cent in December, helping to drive the euro/yen to a record high earlier this month.
The Australian dollar closed on US74.55c against US74.92c here yesterday.
The following are Reuters currency rates:
5pm today 5pm Tuesday
NZ dlr/US dlr US62.24c US62.46c
NZ dlr/Aust dlr A83.49c A83.35c
NZ dlr/euro 0.4980 0.4986
NZ dlr/yen 73.01 73.09
NZ dlr/stg 34.07p 34.32p
NZ TWI 63.05 63.18
Australian dollar US74.55c US74.92c
Euro/US dollar US1.2501 US1.2483
US dollar/yen 117.29 117.03
- NZPA
<i>Currency:</i> Dollar gives up gains
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