KEY POINTS:
The New Zealand dollar eased back from its highest level in nearly two years today.
The kiwi peaked at US73.13c, just a US1.5 cents below its post-float high hit in March 2005.
BNZ said there had been aggressive buying overnight by custodial and investment names.
"The usual mixture of hedge funds and leverage-type accounts were also active New Zealand dollar buyers and this steady demand saw the NZD/USD cross trade briefly above US73.00c," BNZ said.
Dealers said profit taking in the Australian dollar later in the session pulled down the kiwi, which fell back against all currencies.
It closed on US72.65c compared with US72.45c yesterday. The aussie ended on US82.42c against its US82.28c close here yesterday while kiwi cross rate still gained a few pips -- to A88.14c from A88.07c.
Against the Japanese yen, the kiwi reached 86.95 yen, a whisker from a 10 year high. It closed back on 86.62 against 86.27 yesterday.
The kiwi has mainly been driven by the Australian dollar running up to 17-year highs.
The prospect of more interest rate rises, as suggested by yesterday's Quarterly Survey of Business Opinion (QSBO) has also underpinned it.
BNZ economists said there is a 50:50 chance of two 25 basis point hikes in interest rates by June, which would put the official cash rate at 8 per cent.
Anthony Byett of FX Matters said the aussie was possibly more influential than the QSBO survey.
"There's lots to like about the Australian dollar. It could easily go another two or three cents. That's the sort of pressure that would drag our currency up towards the US74-75c level.
He doubted it would go higher unless the US dollar continued to weaken, "and I don't think that's going to happen".
ANZ said the next target for the kiwi dollar on its US cross was US73.28c. Any reversal was unlikely to be sharp.
"Without supporting offshore factors the New Zealand dollar cannot correct let alone 'collapse' as some would wish," ANZ said.
In major currency activity, the euro eased from a record high against the yen on profit-taking but remained firm on expectations for rising euro zone interest rates while weak data reinforced views the Bank of Japan will not be in a hurry to raise rates.
The euro rose as high as 160.16 yen its highest since the single currency's launch in 1999 after Japan's core machinery orders fell more than expected in February from the previous month and cast some doubt on the outlook for capital spending.
The European Central Bank is expected to hold rates steady at its meeting this week, but market players said the central bank was likely to raise interest rates in June.
The euro eased 0.10 per cent to US$1.3423 sliding from a two-year high of US$1.3457 hit yesterday.
Reuters currency rates:
5pm today 5pm Tuesday
NZ dlr/US dlr US72.65c US72.45c
NZ dlr/Aust dlr A88.14c A88.07c
NZ dlr/euro 0.5416 0.5398
NZ dlr/yen 86.62 86.27
NZ dlr/stg 36.80p 36.80p
NZ TWI 70.72 70.56
Australian dollar US82.42c US82.28c
Euro/US dollar 1.3417 1.3416
US dollar/yen 119.24 119.07
- NZPA