KEY POINTS:
The New Zealand dollar recovered today from a tumble below US75c, as investor appetite for risk appeared to return for the moment.
By 5pm, the kiwi was buying US75.23c, up from US74.84c this morning but slightly below yesterday's close of US75.43c. It has fallen about US3c since Friday.
Against the Australian dollar, the kiwi rose to A84.75c from A84.29c, while against the yen it was at 82.70 from 83.03 yesterday.
Westpac currency strategist Michael Gordon said the kiwi traded a wide range of US74.37c to US75.55c, and its recovery was matched by a rebounding Australian dollar.
"Although we had the Dow Jones finish weaker again, in particular another sharp drop in the last hour of trade, and fairly mixed performance in Asian equities, I think there's a sense that the investor risk appetite is starting to recover," Mr Gordon said.
However, market volatility and large trading ranges were likely to continue for the near future.
Revelations by major US banks of losses from the subprime mortgage crisis have raised fears that credit-related wounds could spread to the broader US economy, prompting a retreat from risk.
As a result, the kiwi was hit by a large-scale exit of the carry trade - in which investors borrow a low-yielding currency such as the yen to invest in a high-yielder such as the kiwi.
The Canadian dollar was hit hardest, experiencing its biggest one-day decline against the US dollar since 1971.
Adding to the woes, Asian stock markets tumbled yesterday, with the Nikkei falling to its lowest level for 2007 and the Shanghai market plunging 4 per cent.
Traders said another sell-off in global shares could further dampen risk appetite and trigger more unwinding of carry trades.
Reuters currency rates
5pm today 5pm yesterday
NZ dlr/US dlr US75.23c US75.43
NZ dlr/Aust dlr A84.75c A84.29c
NZ dlr/euro 0.5167 0.5154
NZ dlr/yen 82.70 83.03
NZ dlr/stg 36.51p 36.26p
NZ TWI 69.53 69.47
Australian dollar US88.67c US89.50c
Euro/US dollar 1.4563 1.4636
US dollar/yen 109.96 110.08
- NZPA