The New Zealand dollar underwent a massive correction after hitting US50c overnight, and continued trading in a wide range yesterday.
By 5pm the kiwi had eased to US49.11c, from US49.80c at Monday's local close. It had reached a high of US50.10c in London overnight before plummeting to US48.38c in New York.
The Australian dollar closed in New Zealand at US57.20c, a dip on yesterday's close of US57.46c.
ANZ Investment Bank chief foreign exchange dealer Murray Hindley said the kiwi was closing around the middle of its range today of US48.75c to US49.40c.
"There was talk that one global macro fund liquidated some of its aussie and kiwi long (positions) overnight, which caused a bit of the domino effect and the market was a little bit long."
However, talk of the unnamed hedge fund remained speculation, Mr Hindley said.
"The euro came back a bit, US equities were down about 180 points (at one stage), but I can't see too many reasons why people would be liquidating their kiwi longs to be honest.
"Maybe they were looking for a further push through US50c, and when that didn't eventuate they took a little bit of profit. A lot of those guys have had a pretty good run out of (the kiwi) in the last few months."
Tonight he expected kiwi to remain above US48.50c.
"I think you've still got to be buying dips, certainly back to US48.50c anyway. If we get back above US49.40c-odd, I'd say we're going to again have a look at this US50c level," Mr Hindley said.
Hong Kong and Shanghai Banking Corporation dealer Peter Adams said the unit was sold off as investors switched to Australian dollars ahead of the sale of Sydney's Kingford Smith Airport today for A$5.6 billion ($NZ6.56 billion).
The Prefu (pre-election economic and fiscal update) had little impact on the market, given that it comes so soon after last month's budget.
Offshore, dealers said the greenback was in a corrective phase against the euro after rising from a 28-month low of US98.17c, reflecting the recovery on Wall Street.
The market appeared to be using the upcoming Federal Open Market Committee meeting and the Group of Seven nations' summit meeting in Canada as excuses to unwind positions in the euro and other European currencies.
In Wellington the US dollar was buying 121.81 yen -- little changed from 121.94 yen at last night's local close, while the euro was at US97.07c (US97.05c).
On the crosses at 5pm the kiwi was trading at A85.87c (A86.68c at yesterday's close), 59.82 yen (60.72), 32.72 pence (33.26), 0.7417 Swiss francs (0.7532) and 0.5059 euro (0.5132).
Against the kiwi, the aussie was buying $NZ1.1646 ($NZ1.1538).
On the money market 90-day bills were at 5.99 per cent (5.97), the trade-weighted index was at 56.20 (56.97) and the monetary conditions index eased to minus 180 (minus 113).
The April 2004 bonds were at 6.02 per cent (5.97), the November 2006 bonds were at 6.43 per cent (6.37), and the November 2011 bonds were at 6.60 per cent (6.53).
- NZPA
<i>Currency:</i> Kiwi slowly comes back after post-US50c punishment
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