The New Zealand dollar ended mid-range yesterday after good rallies which saw it break 42USc and hit long-time highs above 84Ac.
The kiwi finished at 41.90USc (41.27USc on Friday), hitting a high at 42.12c and a low at its open around 41.50c.
Against its Australian counterpart it hit 84.45Ac, a level seen briefly in May 2000 and before that in May 1999. But it closed down from that at 84c (83.36c on Friday).
"The market is closing on a slightly easier tone, having been very firm through the day," said Jon Clarke, a director at treasury consultancy Greenwich Financial Services.
The unit was increasingly benefiting from favourable interest rate differentials against Australia and America.
Indeed, with global currency markets on standby for a rates-setting meeting in the US this week, that differential could become more persuasive if the Federal Reserve fulfils expectations of a three-quarters of a percentage point cut. Should that happen, the key American rate would be at 4.75 per cent versus New Zealand's cash rate of 6.25 per cent.
Mr Clarke said that as global equities fell, the investment focus was turning increasingly defensive so people were shifting from a growth mentality back to yield.
He also said local kiwi sentiment was boosted by unusual interest on Friday evening from Europeans.
But the local dollar eventually succumbed to profit taking yesterday, having piled on about 1.3USc from the Friday low.
The troubled Australian dollar found some respite, firming to 49.77USc (49.43c).
Mr Clarke said takeover activity in Australia had helped revive some enthusiasm for the Australasian units, drawing attention to the region's cheap assets.
Looking ahead, the kiwi continues to be favoured over the Aussie on the basis of New Zealand's better economic outlook.
Indeed, Asia-based currency strategy company IDEA Global recommended the kiwi as a buy against the euro and, while yesterday the Aussie regained some ground after hitting a fresh record low of 49.06USc late last week, Australian economists pick it to test that figure again this week.
Mr Clarke did not expect the local unit to rally much higher against the greenback without stability in the euro and Aussie, which tend to set its direction. However, nor did he foresee much downside risk and the kiwi would probably continue to rotate round 41.50USc.
- NZPA
<i>Currency:</i> Feisty kiwi breaches 84Ac
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