KEY POINTS:
The foreign exchange market not only shrugged off New Zealand's $14.45 billion current account deficit for 2006, it bought the kiwi dollar on the news.
The $3.93 billion deficit in the December quarter was not as horrific as the $4.1b, economists had been forecasting.
The kiwi had a fairly choppy run up to the release of the data -- falling below US71c, having briefly hit a 22-month high just above US72c early yesterday.
After the data, fears the deficit could be even worse than predicted were allayed and the kiwi climbed against all currencies.
It ended the local session well bid on US71.25c, but still below yesterday's US71.43c close. Similarly, against the Australian dollar it ended on A88.35c from A88.57c yesterday.
Even international credit rating agency Standard & Poor's was sanguine about the data, calling it positive.
"We see any incremental improvement in the current account as being a plus, but it would need to move a long, long, long way before it came off our radar," Kyran Curry, associate director at S&P, told Reuters.
"It's the single biggest factor that weighs on New Zealand's ratings, it's chronic, it's large, and we'd be looking for an improvement."
An Auckland dealer said that having broken above US71.20c, he expected the kiwi to break higher.
"It's probably onwards and upwards, as long as equity markets behave the kiwi will probably have another crack on the upside," he said.
The kiwi fell overnight along with the US dollar on rumours of conflict between the US and Iran.
That prompted a sharp spike in oil prices and falls in equities that spurred investors to unwind risky carry trades, which involve borrowing in the low-yielding yen and investing in higher-yielding assets.
The greenback suffered its biggest slide against the yen in two weeks but then rebounded as market players viewed comments from Federal Reserve Chairman Ben Bernanke as suggesting the central bank was not ready to cut interest rates just yet.
The NZ dollar also fell against the yen, to 82.92 around 8am from 83.75 at yesterday's close, but by the close had recovered to 83.50.
The trade-weighted index close on 69.57, just down from 69.69 yesterday.
Dr Bernanke told Congress that the troubles in the housing market have clouded the economic outlook but the Fed feels price pressures present a bigger risk.
Reuters currency rates
5pm today 5pm yesterday
NZ dlr/US dlr US71.25c US71.43c
NZ dlr/Aust dlr A88.35c A88.57c
NZ dlr/euro 0.5347 0.5345
NZ dlr/yen 83.50 83.75
NZ dlr/stg 36.25p 36.31p
NZ TWI 69.57 69.69
Australian dollar US80.68c US80.58c
Euro/US dollar 1.3326 1.3357
US dollar/yen 117.16 117.30
- NZPA