The New Zealand dollar settled above US66c today after the market took assurance from Finance Minister Michael Cullen telling ratings agency Moody's yesterday his tight fiscal policy would not radically change.
After rising to US66.45c overnight, the kiwi settled back to US66.25c by 5pm, compared with US65.92c at yesterday's close.
BNZ currency strategist Danica Hampton said stop-loss programmes triggered a variety of model and momentum-type accounts.
But underlying that, the New Zealand dollar's appeal remained its relatively high yield, she said.
The kiwi had a similar skip against the Australian dollar, rising to A88.22c. It closed up at A87.87c from A87.48c at 5pm yesterday.
ANZ bank today said strong demand for the dollar emerged from all quarters overnight following Dr Cullen's reassurances tight fiscal policy would remain.
Looming third quarter inflation data and the Reserve Bank's official cash rate announcement, both next week, appeared set to deliver a spike.
In the major currencies, the yen rose after a newspaper reported that the Bank of Japan plans to increase its monitoring of carry trades, which have helped push the Japanese currency to 10-month lows against the dollar.
Business daily Nihon Keizai said the BOJ was concerned about the trend in which investors borrow yen cheaply to invest in higher-yielding assets overseas (such as the New Zealand dollar).
Playing down the newspaper report, a BOJ spokesman told Reuters that the central bank was not specifically beefing up its monitoring of such carry trades.
By the local close, the US dollar was at 118.58 yen down from 118.75 yen in late US trade but off the day's low of 118.38 yen. It marked a 10-month high of 119.88 yen late last week.
Against the dollar, the euro was little changed at $1.2545
Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US66.25c US65.92c
NZ dlr/Aust dlr A87.87c A87.48c
NZ dlr/euro 0.5280 0.5260
NZ dlr/yen 78.55 78.50
NZ dlr/stg 35.40p 35.41p
NZ TWI 676.92 66.69
Australian dollar US75.36c US75.41c
Euro/US dollar 1.2544 1.2537
US dollar/yen 118.62 119.03
- NZPA
<i>Currency:</i> NZ dollar settles above US66C
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