KEY POINTS:
The kiwi dollar ended flat today after hitching a powerful lift with the Australian dollar, which strengthened on stronger than expected retail data.
Dealers said there was a lot of volatility in the market, particularly in the carry trade, which had seen the kiwi dollar sold off aggressively overnight on no particular news except for a mild rebound in the greenback.
During the morning the kiwi followed the Aussie downwards, hitting a session low of US75.45c, but it rebounded in the afternoon to a peak of US76.40c as retail data sent the Australian currency up half a US cent to above US89c.
At the end of the day, however, the kiwi was little changed, closing at US76.27c compared to US76.25c.
The kiwi has risen 14 per cent against the US dollar since August 17, and analysts expect its rising trend to continue as credit crunch worries recede and investors return to chasing yield.
ANZ Bank said the kiwi could be entering a consolidation phase between US75.45c and US77c, similar to the range seen after the previous sharp dip in July.
"I expect the kiwi dollar to have another run at the topside, maybe up to US76.50c again but I don't think it will sustain those highs," ANZ Investment Bank senior dealer Mark Elliott said.
The kiwi aussie cross fell to A85.79c, compared with A85.92, but improved against the yen to 88.25 yen (87.96 yen), and the euro to 0.5380 (0.5363). The trade-weighted index inched up to 71.60, from 71.52 yesterday.
Elsewhere the Australian dollar also eased, closing here at US88.92c (US88.75c). Today's rally was fuelled by hopes that the strong retail sales data would keep Australia's central bank on a tightening bias, despite it keeping the cash rate unchanged today at 6.5 per cent, as expected.
Investors are now keeping an eye on service sector data due out today and all important jobs data out on Friday to gauge the strength of the US economy.
The greenback has steadied above record lows against both the euro and a basket of major currencies, hurt by signs of a slowdown in the US economy, a 50 basis point Federal Reserve rate cut last month and expectations of more easing to come. Traders said the US dollar's recovery is partly due to caution that policy-makers may be tiring of the dollar's sharp sell-offs.
Reuters currency rates
5pm today 5pm yesterday
NZ dlr/US dlr US76.27c US76.25c
NZ dlr/Aust dlr A85.79c A85.92c
NZ dlr/euro 0.5380 0.5363
NZ dlr/yen 88.25 87.96
NZ dlr/stg 37.33p 37.36p
NZ TWI 71.60 71.52
Australian dollar US88.92c US88.75c
Euro/US dollar 1.4176 1.4217
US dollar/yen 115.84 115.34
- NZPA