KEY POINTS:
The New Zealand dollar eased back today after it rose sharply overnight when co-ordinated measures by major central banks to ease a credit crisis strengthened investors' willingness to take risks.
Investors viewed the move as a sign central banks were being more responsive to the plight of global financial companies hurt by the difficult lending environment.
This encouraged investors to get back into carry trades - the most dominant strategy in the US$2 trillion a day currency market - that involve borrowing in a currency with low interest rates to buy assets in others with high yields.
The kiwi zoomed up to US79.36c from US77.90c at 5pm yesterday but by the close had eased to US78.62c.
It is the first time the NZ dollar has topped US79c since late July. At that time it was descending from a post float peak above US81c, encouraged by intervention from the Reserve Bank that assessed the currency as "unjustifiably high".
The kiwi fell after weak retail sales data. New figures showed seasonally adjusted total retail sales fell 0.7 per cent in October, adding to indications that rising costs and a slowing housing market are hitting consumers.
The data could point to a grim festive season for retailers, if the slowdown continued through November and into this month.
Against the yen the kiwi hit a five-week high of 89.09 overnight, before easing to 87.85 at 5pm after having been at 86.35 at yesterday's local close.
The NZ dollar's strong rise against its Australian counterpart continued. From below A83c at the start of November, the kiwi reached A89.49c early today. By the local close it had eased to A88.90c from A88.90c at 5pm.
The trade weighted index closed on 72.63 from 72.18 yesterday.
The central bank measures were the first co-ordinated action taken since terror attacks that shut down US financial markets on September 11, 2001.
"The liquidity measures will help fund markets to a degree, especially now when liquidity conditions are tight ahead of the year-end," said Minoru Shioiri, chief manager of forex trading at Mitsubishi UFJ Securities.
Under the global central banks' plan, the Fed will auction short-term funds to depository institutions against a wide variety of collateral that can be used to secure discount window loans.
Some traders believe the central banks' liquidity steps may not resolve underlying credit problems resulting from losses stemming from the slumping US housing market or prevent slower growth in the world's biggest economy.
Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US78.62c US77.90c
NZ dlr/Aust dlr A88.90c A88.90c
NZ dlr/euro 0.5328 0.5315
NZ dlr/yen 87.85 86.35
NZ dlr/stg 38.33 38.25p
NZ TWI 72.63 72.18
Australian dollar US88.28c US87.60c
Euro/US dollar 1.4724 1.4660
US dollar/yen 111.95 110.82
- NZPA