The New Zealand dollar held its ground yesterday, despite aggressive selling from across the Tasman.
At 5pm the kiwi was at US46.85c, from US46.95c on Wednesday, having traded within a large range overnight of more than one US cent to a low of US46.25c. The aussie was at US54.23c from US53.93c at Wednesday's close.
Both the southern currencies picked up markedly this morning as American shares rallied sharply in late trading.
ANZ senior foreign currency exchange manager Richard Marshall said the kiwi was sold off against the aussie in some aggressive selling during the afternoon, but recovered as the Asian sessions kicked off.
"Kiwi rallied quite strongly to US47.35c on the back of the aussie, and then there was some aggressive selling which pushed the kiwi back down to US46.75c. We've seen some Asian buying this afternoon that's pushing us back towards US47c," Mr Marshall said.
"There's no fundamental reason behind (the fall).
"There are a few American funds which have been holding kiwi for some time. Probably with the problems in the US they're offloading their kiwi positions. And possibly prior to the election they're taking a bit of profit, a safety move," he said.
The current Labour Government appears likely to be returned to power in Saturday's general election, but is probably going to have to negotiate with minor parties to form a government.
"We probably will be governmentless on Monday, so it's going to make (the kiwi) vulnerable for a little while.
Anything could happen overnight, he said.
"I'd pick a range of US46.60c to US47.30c overnight. It's quite a wide range but it's what we're seeing at the moment.
"Around US47.30c is where resistance is at the moment, but as far as support is concerned there is no real support now, probably US46.25c."
Dealers believe the kiwi has now broken out of the US48c/49c pattern it was trading in and is set to head lower.
The kiwi has surged since February when it was trading at around US42c. Buoyed by interest rate differentials, the unit rose quickly and steeply to peak just above US50c in late June.
In offshore trade the dollar struggled against the yen and the euro after failing to draw any benefit from a big overnight rally in US share prices.
Sentiment towards the dollar was still bearish as there was no real proof that worries over accounting practices at US firms had gone away and US share prices could easily come under attack again, dealers said.
The Dow Jones industrial average rallied from early five-year lows on Wednesday to finish at 8,191.29, up 488.95 points, or 6.35 per cent. That rise was the second largest jump in points ever for the blue chip benchmark.
The Nasdaq Composite index rose 4.98 per cent.
On the crosses at 5pm, the kiwi was buying A86.31c (A87.06c at yesterday's close); 54.47 yen (55.03), 29.71 pence (30.01), 0.6796 Swiss francs (0.6879) and 0.4687 euro (0.4739).
The aussie was buying $NZ1.1583 ($NZ1.1490).
On the money market, 90-day bills were at 5.98 per cent (5.99), the trade-weighted index was at 53.07 (53.47) and the monetary conditions index was at minus 469 (minus 430).
On the debt market, the April 2004 bonds were at 5.59 per cent, the November 2006 bonds were at 6.21 per cent (6.16), and the November 2011 bonds were at 6.45 per cent (6.41).
- NZPA
<i>Currency:</i> Kiwi lifts from overnight lows
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