KEY POINTS:
The New Zealand dollar rebounded a little today after it had taken another overnight beating in the wake of another sell-off in world equity markets.
A calmer day for equities today helped soothe currency markets.
Forex markets were taking their lead from equities since last week's 9 per cent fall in the Shanghai share market.
Tokyo shares today helped stem a week-long sell-off in risky assets that was exacerbated by the Japanese currency's sharp rally.
The Nikkei stock average initially climbed 0.5 per cent, snapping a five-day losing streak and providing hope for investors the worst of the pull-back from equities may have run its course.
"Stock markets don't appear to be sliding significantly further, and that could help the currency market consolidate," a dealer at a Japanese bank said.
Traders remain cautious of a further unwinding of yen short positions and a slide in global equity markets.
Against the yen, where much of the damage is occurring, the kiwi opened at a four-month low of 78.34 yen against its 79.04 close yesterday. However, it recovered through the session to end on 79.14.
The NZ dollar had been buying more than 85.70 yen before the shakeout on world markets started last Tuesday evening.
In its latest decline against the greenback, the kiwi moved fairly steadily downwards from US68.85c at lunchtime yesterday to a four-month low point below US67.40c early today. However, again there was a recovery during the day so by 5pm it was buying US67.99c.
The kiwi had been above US71c before its slide started a week ago.
Against the Australian dollar, the NZ currency's trajectory has been more erratic. Overnight, it briefly dropped to A87.25c, where it has not been since late-December. It opened at A87.57c and closed on A87.80c, not much below yesterday's A87.85c close.
The trade weighted index lifted from its 66.85 opening to 67.10 and against 67.35 yesterday.
Currencies like the New Zealand and Australian dollars, pound and euro remain vulnerable against the yen, traders said.
BNZ currency strategist Danica Hampton felt the kiwi has been sold too far in the last week.
"We can't help but think that the recent NZD sell-off is starting to look a bit overdone.
"After all, nothing has really changed from the NZ point of view. NZ's fundamental picture of robust growth, relatively attractive interest rate premium, and hawkish central bank are all remain currency supportive.
"But, we also acknowledge that market participants will be wary of buying NZD while the market remains nervous about the outlook for global equity markets and risk appetite remains muted."
The Australian dollar fell to five-month lows around 88.55 yen earlier in the session before clawing back to near 89.50 yen.
The Reserve Bank is unlikely to be the only central bank to increase interest rates this week.
The European Central Bank is expected to raise rates by 25 basis points to 3.75 per cent after its meeting on Thursday, while central banks in Canada, Australia and the Bank of England are scheduled to hold meetings.
Rates:
5pm today 5pm yesterday
NZ dlr/US dlr US67.99c US68.32c
NZ dlr/Aust dlr A87.80c A87.85c
NZ dlr/euro 0.5186 0.5194
NZ dlr/yen 79.14 79.04
NZ dlr/stg 35.24p 35.37p
NZ TWI 67.19 67.35
Australian dollar US77.40c US77.71c
Euro/US dollar 1.3102 1.3149
US dollar/yen 116.48 115.73
- NZPA