KEY POINTS:
The New Zealand dollar took another stab at breaking above US76c today as both the US dollar and Japanese yen weakened.
Since being floated 22 years ago, the kiwi has only ever been above US76c for a few days earlier this month and it's a level that seems to have provoked the Reserve Bank to twice intervene in currency markets.
It traded at US76c but ended the day about where it began on US75.90c, still well above yesterday's US75.54c close.
Robust global growth, buoyant stocks and renewed calm after a sell-off in major bond markets have prompted investors to borrow funds in currencies like the yen to purchase higher-yielding currencies such as the New Zealand and Australian dollars.
"Carry trades are the underlying driver of the whole move (general yen weakness)," said Luke Waddington, head of FX trading at Royal Bank of Scotland in Tokyo.
Currency strategists at RBC Capital Markets said that the New Zealand dollar has moved back into "intervention range" and the Reserve Bank should be watched closely.
Today's rise in the kiwi was despite migration data which economists said was weaker than expected and could signal an easing in the housing market.
Statistics New Zealand said today that a net 360 long-term and permanent migrants arrived in the country in May on a seasonally adjusted basis.
The US dollar's widespread easing came as US bond yields continued to retreat from five-year highs hit last week, eroding their appeal to foreign investors.
Against the yen, the kiwi went ever higher, ending on a new 20-year closing high of 93.65 from 93.42 at 4.30pm yesterday. The yen was near at all-time low against the euro and a 4-1/2 year low against the US dollar.
Despite the yen's mild rise against the greenback overnight, market sentiment remained positioned against the currency as investors continued to borrow it at low Japanese interest rates in order to buy higher-yielding currencies.
Hiroshi Watanabe, Japan's vice finance minister, said on Tuesday he was watching the speculative yen carry trades carefully but said they did not as yet pose a risk to Japan's economy.
The kiwi held solid against the Australian dollar, ending on A89.72c against A89.62c yesterday.
The ANZ bank said today the Australian dollar, approaching US85c, was also elevated and while there had not been any hint of intervention by the Australian central bank, any such action should not come as a surprise to markets.
The aussie rose to US84.65c from US84.31c yesterday.
The trade-weighted index ended on 73.87 from 73.61.
Reuters currency rates:
4.30pm today 4.30pm yesterday
NZ dlr/US dlr US75.90c US75.54c
NZ dlr/Aust dlr A89.72c A89.62c
NZ dlr/euro 0.5652 0.5629
NZ dlr/yen 93.65 93.42
NZ dlr/stg 38.20p 38.07p
NZ TWI 73.87 73.61
Australian dollar US84.65c US84.31c
Euro/US dollar 1.3326 1.3423
US dollar/yen 123.34 123.62
- NZPA