KEY POINTS:
The New Zealand dollar spiked higher today in a frenetic start to the trading week.
The buying was a return to the carry-trade purchases that buoyed the local currency in the past and it triggered stop loss orders, said Murray Hindley of ANZ.
It mostly occurred in opening trading and then the market settled down.
The New Zealand dollar was at US69.34c by 5pm having peaked around US69.58c in early trading. That compared with US68.70c on Friday evening.
The kiwi dollar took a big hit last week from the unwinding of carry trades and even an interest rate rise from the central bank failed to buoy it late in the week. Traders decided the bank's focus on alternatives to interest rates to manage monetary policy meant further rate rises were less likely.
At the same time investors who bought high yielding currencies like the New Zealand dollar have been unwinding their positions.
The BNZ said the strength today appeared to have start with a sharp rally in the euro-yen cross, dragging all other currencies firmer against the yen.
By 5pm the kiwi was buying A88.77c from A88.24c at 5pm on Friday. It was also at 0.5288 euro from 0.5227, and 81.98 yen from 80.72. The trade weighted index was at 68.59 from 67.92.
Dealers said the US dollar strengthened against the yen and Swiss franc after a report showing US jobs growth gave investors courage to add to carry trades, riskier investments financed by borrowing in low-yielding currencies.
But last week's sudden spurt of risk aversion, which knocked global equity markets lower and propelled the yen to a three-month high against the greenback, still caused investors to tread cautiously back into high-yielding currencies, such as the kiwi.
Analysts said it might be too early to call an end to the unwind of carry trades, especially as positions built up against the yen had become so extreme for so long.
Reuters currency rates:
5pm today 5pm Friday
NZ dlr/US dlr US69.34c US68.78c
NZ dlr/Aust dlr A88.77c A88.24c
NZ dlr/euro 0.5288 0.5227
NZ dlr/yen 81.98 80.72
NZ dlr/stg 35.85 35.60p
NZ TWI 68.59 67.92
Australian dollar US78.10 US77.91c
Euro/US dollar 1.3112 1.3155
US dollar/yen 118.22 117.34
- NZPA