KEY POINTS:
The New Zealand dollar largely held onto gains made early this morning, after comments from US Federal Reserve chairman Ben Bernanke appeared to foreshadow an aggressive US interest rate cut this month.
A 50 basis point cut in US interest rates to 3.75 per cent would boost the appeal of the New Zealand dollar, as the Reserve Bank's official rate is 8.25 per cent, and likely to stay so for much of the year.
Investors could earn 4.5 percentage points more interest from investments in NZ dollars.
By 5pm, the kiwi was at US78.32c from US77.50c late yesterday, and near its four-week high of US78.69c hit during the session.
Against the Aussie, the kiwi was at A87.58c from A87.69c yesterday, and it was buying 85.54 yen from 84.97 yen late yesterday.
The kiwi was at 0.5288 euro from 0.5273 euro yesterday.
"We started to see it push higher through the London session overnight," said ANZ Institutional Bank chief foreign exchange dealer Murray Hindley.
"Bernanke made comments about 6.30 this morning so that caused a flurry before the Wellington session started, and it's obviously held its gains pretty much across the course of the day."
He expected volatility to continue.
"I would suggest we're back to the yield plays now, and with widening interest rate differentials (with the US), currencies like the kiwi and Aussie are going to benefit."
In contrast to a 4 per cent fall for the New Zealand sharemarket so far this year, the NZ dollar has rising over 2 per cent.
The kiwi would encounter resistance US79.40c, and it was supported at US78.30c.
The US dollar remained near a five-week low against the euro after Bernanke's comments, in which he said the US economy needed a boost but was not forecast to slide into recession.
The comments from Bernanke contrasted with those from European Central Bank President Jean-Claude Trichet, who emphasised an inflation-fighting stance and said policy was not neutral.
The Bank of England held rates at 5.5 per cent on Thursday, but was expected to cut them in February.
Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US78.32 US77.42c
NZ dlr/Aust dlr A87.58c A87.54c
NZ dlr/euro 0.5288 0.5273
NZ dlr/yen 85.54 84.97
NZ dlr/stg 39.90p 39.53p
NZ TWI 72.12 71.69
Australian dollar US89.43c US88.45c
Euro/US dollar 1.4810 1.4685
US dollar/yen 109.22 109.76
- NZPA