KEY POINTS:
The New Zealand dollar had a mixed day today ahead of a widely expected interest rate rise tomorrow.
A rebound in world equity markets today helped settle the nerves of those invested in the New Zealand dollar and carry traders.
Dealers said a jump in sterling against the yen, from a five-month low hit earlier in the latest session, sparked a broad rise in higher-yielding currencies against the yen, driving up the Australian and New Zealand dollars more than 1 per cent overnight.
The kiwi continued its partial recovery against the yen, closing at 79.49 against 79.14 at 5pm yesterday. It is more than 2 yen above this week's low but still 6 per cent on its 85.70 level before last Tuesday's slump of the Shanghai stock market.
Against the US dollar, the kiwi closed on US68.25c against US67.99c at the same time yesterday.
BNZ currency strategist Danica Hampton said the NZ dollar had benefited from a stabilisation in global equity markets and tentative rebuilding of carry trades.
While the Reserve Bank is almost universally expected to hike the cash rate to 7.5 per cent from 7.25 per cent, most interest will focus on whether the bank signals another one or two rate hikes this year.
Against the Australian dollar, the kiwi closed on A88.02c from A87.80c at 5pm yesterday. The trade weighted index lifted to 67.41 from 67.19.
A dip in Tokyo stocks in morning trading kept investors concerned that global markets were still fragile following their plunge in the past week.
Japan's benchmark Nikkei average fell 0.46 per cent, just a day after a 1.2 per cent rebound helped to give investors confidence that a weeklong sell-off in riskier assets had run its course and boosted higher-yielding currencies against the yen.
"Even though markets calmed a bit yesterday, investors are still not confident that we're out of the woods yet, " said Kikuko Takeda, a currency analyst at Bank of Tokyo-Mitsubishi UFJ.
The US dollar pulled away from the day's high around 116.90 yen touched when the Nikkei rose nearly 1 per cent during the morning.
Traders said the yen would likely resume its slide if equity markets continued to find their footing.
Rates:
5pm today 5pm yesterday
NZ dlr/US dlr US68.14c US67.99c
NZ dlr/Aust dlr A88.02c A87.80c
NZ dlr/euro 0.5197 0.5186
NZ dlr/yen 79.49 79.14
NZ dlr/stg 35.37p 35.24p
NZ TWI 67.41 67.19
Australian dollar US77.54c US77.40c
Euro/US dollar 1.3127 1.3102
US dollar/yen 116.49 116.48
- NZPA