KEY POINTS:
The New Zealand dollar recovered today from a spike down precipitated by comments published overnight on the state of the economy by Reserve Bank Governor Alan Bollard.
It fell as low as US75.55c after Dr Bollard said the economy would be flat in the second quarter before picking up later in the year.
In an interview with specialist publication Central Bank News, he said an economic contraction in the first quarter was disappointing, but quarterly figures were volatile.
The kiwi closed the session on US75.90c, not far below its US76.08c close yesterday.
However, it continued to lose ground against the Australian dollar, closing at A79.07c from A79.42c yesterday, after the aussie jumped on surprisingly strong retail sales data showed demand in the economy remained robust, despite surging oil and high interest rates.
The aussie hit a 25-year high of US96.68c on Monday and today ended on US96.01c compared with US95.78c yesterday.
The ANZ bank said Dr Bollard's comments had thwarted an attempted recovery by the NZ dollar overnight, with support levels easily broken.
It expected the comments, and rising risk aversion, to continue to weigh negatively on the kiwi.
The euro firmed against the dollar, extending the previous day's gains on expectations the European Central Bank will bump up interest rates later this week.
But activity was subdued in Asian trade as many investors retreated to the sidelines ahead of an ECB policy meeting tonight and the ever-important monthly US employment report due tomorrow (NZT).
The ECB is widely expected to lift interest rates by a quarter percentage point to 4.25 per cent this week.
"The market is pricing in a rate hike and hawkish comments supporting expectations for further monetary tightening beyond this month," said Tsutomu Soma, senior manager of foreign assets at Okasan Securities.
"If comments are not hawkish enough, a wave of profit-taking is likely to hit the euro," he said.
The New Zealand dollar trade-weighted index ended on 67.42 from 67.66 at 4.30pm yesterday.
CROSS RATES
NZ dlr/US dlr US75.90c
NZ dlr/Aust dlr A79.07c
NZ dlr/euro 0.4802
NZ dlr/yen 80.45
NZ dlr/stg 38.06p
Australian dollar US96.01c
Euro/US dollar 1.5806
US dollar/yen 105.99
- NZPA