KEY POINTS:
The New Zealand dollar regained stability today after a volatile session yesterday when it lost heavily to the yen and greenback.
Currency markets took their lead from equity markets which settled after the turmoil precipitated by Tuesday's 9 per cent fall in the Shanghai sharemarket.
Comments by Federal Reserve chairman Ben Bernanke that it was "reasonable" to expect stronger growth later in the year helped soothe markets despite a spate of weak economic US data.
The kiwi closed in the local market on US70.05c, virtually unchanged from yesterday. It was steady against the yen on 82.80 and a touch firmer against the Australian dollar on A89.15c.
Although there was a world swing against carry trade currencies such as the kiwi on Tuesday and yesterday, it proved to be short-lived.
Demand for uridashi bonds - issued in Japan but denominated in the New Zealand dollar - was as rampant as ever with $812 million of new issues announced overnight.
BNZ currency strategist Danica Hampton said yesterday's fall of the kiwi against the yen only served to spur on Japanese retail demand.
Asian importers and Japanese retail investors were all keen to buy the NZ currency on dips, she said.
"Overall, market participants still think that NZ fundamentals are supportive for the currency, and appear to be viewing yesterday's slide as a healthy correction from overbought levels."
Investors were keeping a wary eye on the performance of shares, with Tokyo's benchmark Nikkei average falling 0.5 per cent in early trade a day after tumbling nearly 3 per cent yesterday.
However, traders seemed to quickly shrug off the Shanghai slump.
"With the fall in US stocks stopping and credit spread shrinking, we see risk asset markets started to stabilise. Bernanke's comments also gave some confidence to the market," said Koji Fukaya, a senior currency strategist at Deutsche Bank in Tokyo.
Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US70.05c US70.08c
NZ dlr/Aust dlr A89.15c A89.02c
NZ dlr/euro 0.5300 0.5307
NZ dlr/yen 82.80 83.04
NZ dlr/stg 35.70p 35.69p
NZ TWI 68.98 69.02
Australian dollar US78.62c US78.72c
Euro/US dollar 1.3221 1.3216
US dollar/yen 118.25 118.52
- NZPA