A resurgent US dollar knocked down the kiwi today along with the euro and Australian dollar.
While yesterday's shock rate rise was expected to underpin the kiwi, the hint at the same time from the US Federal Reserve that it might soon hike rates overwhelmed the Reserve Bank's announcement.
By 5pm, the kiwi was buying US66.94c compared with yesterday's closing level of US67.59c.
Most of the damage was done in overnight trading when a large US bank put out a sell order on the Australian dollar and the kiwi suffered collateral damage.
The aussie finished here at US76.32c compared with its US77.18c close yesterday.
A Wellington dealer said today that the kiwi would still be sought and the only thing that had really changed was the US dollar was no longer seen as a pariah currency.
"Basically, the market came in and bought dollars across the board.
"I expect that with quite good underlying economic fundamentals the trend still lies intact for the kiwi to go higher.
"Both the kiwi and the aussie are still high yielding currencies and I guess with yesterday's rate move the kiwi will just attract higher interest," she said.
She described the fall as a "correction" based on positive US dollar sentiment rather than negative kiwi sentiment.
Westpac currency strategist Johnathan Bayley said currency traders wanted to trade the US dollar higher on the Fed's shift in language -- that there was no longer an imperative to keep rates stable "for a considerable period" to ensure the US recovery bedded in.
Traders believe they have seen the bottom of the US interest rates cycle.
The US dollar's rebound over the past two days of trading has pushed the euro down into new ranges and may alter traders' perceptions about what to expect from next week's Group of Seven finance ministers' meeting in Florida, analysts said.
At 5pm, the euro was at US$1.2411 (US$1.2472 yesterday), while the greenback was buying 105.95 yen (106.10).
On the crosses, the kiwi was buying A87.72c (A87.58c), 0.5392 euro (0.5421), 70.91 yen (71.70), 36.85 British pence (37.16), and 0.8428 Swiss francs (0.8482).
On a trade weighted basis, the New Zealand dollar was at 66.42 (66.85).
The monetary conditions index was at plus 612 (646), and 90-day bank bills were at 5.57 per cent (5.58).
February 2006 bond yields were unchanged at 5.70 per cent, as were July 2009 bonds at 5.95 per cent and April 2013 at 6.07 per cent.
- NZPA
<i>Currency:</i> Resurgent US dollar sends Kiwi lower
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