KEY POINTS:
The New Zealand dollar hit a year low against its Australian counterpart early today as sellers of the kiwi continued to overwhelm buyers.
But the kiwi, which has acted as a proxy for concerns over global credit markets, recovered well in the afternoon as Asian equity markets reacted mildly to a sharp dip on Wall Street.
From A84.23c at 5pm yesterday, the kiwi slipped to a low of A83.37c, but by the close it had recovered to A84.70c.
The Australian dollar got a fresh boost from data showing robust job gains in August, providing some evidence the economy is weathering the market turmoil and stoking expectations for higher interest rates.
Against the US dollar, the kiwi ended at US68.95c compared with US69.30c yesterday.
ANZ bank said further NZ dollar selling from offshore had helped to fill local demand throughout yesterday and overnight as support levels were easily broken.
The kiwi had also returned to a position overnight of moving in step with the US sharemarket, which fell around 1.5 per cent on US economic data.
The greenback tumbled overnight against the yen and euro after weaker-than-expected US employment and housing data stoked fears that a lingering credit crisis is starting to put the brakes on US economic growth. But the yen surrendered some of its gains when the Nikkei opened with only mild losses.
Analysts said the current atmosphere was also causing investors to shun carry trades, in which they purchase higher-yielding assets, such as the NZ dollar, funded by loans in countries such as Japan and Switzerland.
The low-yielding yen has been widely used as a cheap source of funds to buy higher-yielding currencies in carry trades, and market players have used the performance of equity markets as a barometer of whether to hold or cut back on risky positions like carry trades.
Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US68.95c US69.30c
NZ dlr/Aust dlr A83.70c A84.23c
NZ dlr/euro 0.5047 0.5082
NZ dlr/yen 79.47 80.17
NZ dlr/stg 34.09p 34.42p
NZ TWI 66.28 66.78
Australian dollar US82.33c US82.28c
Euro/US dollar 1.3647 1.3604
US dollar/yen 115.37 115.83
- NZPA