A surge of support for the US dollar today took the heat off the kiwi unit, which settled around US70c.
Foreign exchange traders suspect central banks have begun, or are about to begin, intervening to sell euros and yen. That sent the US dollar 2 per cent higher against the euro and yen.
While suspicion grew that the dollar's precipitous two-year downtrend may have run its course, an absence of any clear change in the market's environment kept traders wary about trying to pick a bottom.
"This does not suggest a turnaround in the dollar's bearish trend. It's just an inevitable adjustment after the dollar became oversold," said Kosuke Hanao, head of forex sales at Royal Bank of Scotland.
The New Zealand dollar traded between US69.85c and US70.25c and ended at US70.05c from US70.65c yesterday.
The Australian dollar was similarly whacked -- down at US79.05c from US79.75c yesterday.
"The markets are wary of the central banks," ANZ Investment Bank chief dealer in New Zealand Murray Hindley said.
Some big funds were starting to take profits on the euro, kiwi and aussie, he said.
Statistics showing a 0.5 per cent dip in house prices and a 3.5 per cent fall in sales in January may increase pressure on the Reserve Bank not to hike interest rates at its March 11 review. A decision to hold rates was likely to see the kiwi fall back.
"It'd certainly be a little bit difficult to raise rates with the currency around these levels," said Mr Hindley.
His bank is looking for a short-term correction in the kiwi to US69.20c.
Westpac currency strategist Johnathan Bayley said the kiwi, aussie and euro had all hit fresh highs against the greenback yesterday, prompting the rebound in the greenback.
The euro came down from its US$1.2930 high to US$1.2715 at the local close.
Meanwhile, the greenback was buying 106.62 yen (105.72).
Mr Bayley said there was a short-term risk that the kiwi continued to soften.
"But don't expect the dip to be too deep because there's still plenty of investment buyers and trade buyers waiting for US dollar strength."
On the crosses, the kiwi closed at A88.50c (A88.62c), 0.5509 euro (0.5497), 74.67 yen (74.72), 37.04 British pence (37.03), and 0.8682 Swiss francs (0.8658).
The trade-weighted index ended at 68.56 (68.74), just below its all-time high of 69.07 in April 1997. The monetary conditions index was at plus 774 (787).
The 90-day bank bill yields were unchanged at 5.60 per cent.
In the bond market, the February 2006 yields closed at 5.53 per cent (5.48), July 2009 bonds were at 5.74 per cent (5.69), and the April 2013s were at 5.89 per cent (5.84).
- NZPA
<i>Currency:</i> US dollar surge takes heat off Kiwi dollar
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