The New Zealand dollar flirted with fresh seven-year highs just above US71c today but then closed the day on a par with yesterday's close.
The kiwi rose to US71.01c in the morning but then backed off to US70.65c at the close.
Westpac chief dealer Basil Payn said the kiwi was driven up by further "yield buying" but was then taken down by profit taking by Asian traders and selling New Zealand dollars in favour of Australian dollars.
The Australian dollar closed on US79.75c against US79.27c yesterday and the kiwi-aussie cross rate fell to A88.62c from A89.10c yesterday.
Mr Payn said the cross play had investors taking a medium-term position in favour of the more robust Australian economy and the tightening stance of its Reserve Bank.
BNZ currency strategist Sue Trinh said the kiwi was hovering around its cyclical highs, but had not managed to push upwards.
Its morning move came after comments in Sydney last night by Reserve Bank of Australia (RBA) deputy governor Glenn Stevens.
Economists said Mr Stevens' speech was consistent with a tightening bias in the current conduct of the RBA's monetary policy, which sent the Australian dollar higher.
Mr Stevens said the "neutral" interest rate, currently 5.25 per cent, would help keep the economy growing at its full potential with steady inflation, in the absence of any external shocks.
Ms Trinh said the market perceived Mr Steven's comments as hawkish.
"That inspired the yield chasers to jump in on the aussie and that dragged the kiwi higher.
The greenback's weakness was most pronounced in the European currencies.
The euro closed at US$1.2857 (US$1.2778), while the greenback finished at 105.72 yen (105.63).
On the other crosses the kiwi was buying 0.5497 euro (0.5527), 74.72 yen (74.63), 37.03 British pence (37.37) and 0.8658 Swiss francs (0.8710).
The trade-weighted index ended at 68.74 (68.91), still hovering just below its all-time high of 69.07 in April 1997. The monetary conditions index was at plus 787 (799).
The 90-day bank bill yields closed unchanged at 5.60 per cent.
In the bond market, the February 2006 yields were at 5.48 per cent (5.49), July 2009 bonds were at 5.69 per cent (5.70) and the April 2013s were at 5.84 per cent (5.86).
- NZPA
<I>NZ Currency:</I> Kiwi dollar flirts above US71c but closes easier
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