KEY POINTS:
The New Zealand dollar was again threatening US73c following a choppy session today.
It strengthened at US72.82c from US72.63c at yesterday's close, shrugging off a 6 per cent fall on the Shanghai stock market. It briefly traded above US73c overnight and as low as US72.63c.
It gained on other currencies as concern increased about another interest rate lift by the Reserve Bank next week. It rose to A88.94c against the aussie from A88.73c. The trade weighted index rose to 71.12 from 70.95.
The ANZ bank today said the kiwi's yield appeal had been boosted as the market reassessed the Reserve Bank's likely decision when it reviewed New Zealand interest rates next week.
But attempts by the Chinese authorities to cool down their economy, as happened overnight, typically saw investors move into risk-aversion mode with some unwinding of carry trades.
Currency movements since Chinese authorities announced a rise in stamp duty on share trades on Shanghai's bourses suggested that could be the case again, ANZ said.
The yen extended its rebound from a record low against the euro as investors further cut back risky positions in carry trades following the Chinese stock market tumble.
Investors were worried that China's tax hike could hit global equity markets and heighten risk aversion.
Carry trades, in which investors borrow low-yielding currencies such as the Japanese yen to fund purchases of assets offering higher returns, are vulnerable to reduced risk appetite, often prompting a sharp appreciation of the yen when investors reverse such positions.
"The fate of the dollar/yen depends on the performance of Chinese stock today," said a senior trader at a Japanese bank.
"If Chinese stocks fall further, the yen may rise."
Reuters currency rates:
4.30pm today 4.30pm yesterday
NZ dlr/US dlr US72.82c US72.63c
NZ dlr/Aust dlr A88.94c A88.73c
NZ dlr/euro 0.5415 0.5402
NZ dlr/yen 88.40 88.14
NZ dlr/stg 36.75p 36.61p
NZ TWI 71.12 70.95
Australian dollar US81.85c US81.83c
Euro/US dollar 1.349 1.3435
US dollar/yen 121.42 121.38
- NZPA