Yesterday's interest rate rise gave the New Zealand dollar a boost before it was hit by the fallout from the Australian central bank decision to hold rates steady.
At 5pm the kiwi traded at US48.85c, up from Tuesday's US48.61c close, while the aussie had risen to US56.20c (US56.00c).
The market had fully expected the Reserve Bank to hike the Official Cash Rate to 5.75 per cent but after the news it had, the dollar jumped to US48.92c.
However, hours later the Reserve Bank of Australia left the key interest rate unchanged across the Tasman at 4.75 per cent.
"The rate rise by the RBNZ saw the kiwi move up towards the US49c level," one local dealer said.
"The fact that the RBA didn't raise rates put pressure on the aussie dollar, which in turn saw us move back down to US48.70c, and basically we're finishing about US48.90c. So it's been an up and down day.
"I think the kiwi should be quite well supported, there's a bit of interest play out there so we should find a little bit of support against the US and the aussie."
He picked the kiwi to trade between US48.70c and US49.20c overnight.
In offshore trade, the greenback edged up against the euro and yen in light trade ahead of the July 4 United States holiday, but most players expect it to be pressured as Wall Street struggles to stay in positive territory.
The dollar's recovery was weak, with market players reluctant to take new long positions after US shares prices ended at a five-year low.
Last night the euro was trading in New Zealand at US98.38c, compared with US98.32c Tuesday, after ceding gains made above US98.60c during the day.
On the crosses at 9am the kiwi rose to A86.93c (A86.30c at Tuesday's close), 58.65 yen (58.31), 31.91 pence (31.80), 0.7280 Swiss francs (0.7267) and 0.4967 euro (0.4945).
Against the kiwi, the aussie was buying $NZ1.1504 ($NZ1.1523).
On the money market 90-day bills were at 5.99 per cent (6.02), the trade-weighted index was at 55.68 (55.44) and the monetary conditions index tightened to minus 227 (minus 245).
On the debt market the April 2004 bonds were at 5.94 per cent (6.03), the November 2006 bonds were at 6.26 per cent (6.41), and the November 2011 bonds were at 6.55 per cent (6.62).
- NZPA
<i>Currency:</i> Kiwi loses steam after initial rate rise boost
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