KEY POINTS:
The New Zealand dollar briefly peaked above US72c today for the first time in nearly two years and then backed off rather rapidly.
Having touched a high of US72.04, a level that will have exporters screaming, the kiwi ended the local session on US71.43c -- well down on yesterday's US71.77c close.
Dealers said the US dollar's failure to hold above 118 yen saw it sold and the kiwi and aussie dollars subsided in tandem.
The Australian dollar closed on US80.58c from US80.97c yesterday.
A Wellington dealer said traders were cutting exposure to the so called carry trade currencies -- high yielding, but higher risk currencies.
He said there were fears the US dollar would retreat to 115 yen from its 117.30 close here.
"The kiwi looks a wee bit soft and will remain under pressure until the dollar-yen is sorted."
BNZ currency strategist Danica Hampton said it had climbed to its 22-month high against a generally weakening US dollar, which was affected by softer than expected US consumer confidence data and concerns the Federal Reserve may need to cut US interest rates this year.
Despite the Westpac McDermott Miller consumer confidence index out today showing an easing of consumer confidence in this country, a variety of offshore funds were buying the NZ dollar.
It continued to be supported by talk of new uridashi demand and the launch of new Japanese investment trusts, Ms Hampton said.
Overnight, the kiwi flirted with the 85 yen level, but was knocked back by profit-taking and commercial selling out of Japan that saw it close on 83.75.
On the Australian cross, the kiwi closed on A88.57c from A88.62c yesterday. The trade-weighted index eased to 69.69 from 70.09.
Disappointment about Japanese investment trusts' weak demand for foreign currencies ahead of the month-end, led traders to drop yen-selling positions.
Rumours that a conflict had broken out between Iran and the United States also weighed on the dollar.
The US Navy said it had no information to substantiate a market rumour that Iran had fired at a US naval vessel in the Gulf, and the the White House issued a denial.
"The geopolitical risk of a conflict between Iran and the US also added to the bearish sentiment on the dollar, though it only sounds like an excuse for traders to hit technical levels," said a senior trader at a Japanese bank.
A fall in the euro against the yen also helped drag the Australian and New Zealand dollars down.
The local market will anxiously watch tomorrow's current account data. Economists are forecasting a massive $4.1 billion deficit for the December quarter that will swell the annual deficit to over $14.4 billion.
Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US71.43c US71.77c
NZ dlr/Aust dlr A88.57c A88.62c
NZ dlr/euro 0.5345 0.5382
NZ dlr/yen 83.75 84.74
NZ dlr/stg 36.31p 36.43p
NZ TWI 69.69 70.09
Australian dollar US80.58c US80.97c
Euro/US dollar 1.3357 1.3332
US dollar/yen 117.30 118.11
- NZPA