KEY POINTS:
The New Zealand dollar has stabilised today after taking an overnight tumble against the US dollar.
It is now buying US78.36c - after falling to US78.23c this morning.
It hit a four-week high of nearly US80.4c on Wednesday followed by a three and half week low of about US77.8c on Friday.
Deutsche Bank foreign exchange strategist John Horner said the most important development during the last couple of days was the broad based strength in the US dollar associated with a weakening business sentiment in the Eurozone.
The weaker European data had taken away some of the upside for the Euro and the down side for the US dollar.
"For this decline to continue we need to see the data in Europe continue to weaken so as to take away the need for the [European Central Bank] to continue to talk hawkishly," Horner said.
Trading in the Kiwi was likely to be more range bound, until there was greater clarity on the Eurozone outlook, he added.
"Although it may continue to underperform on the crosses [such as against the Australian dollar] given the weakening domestic activity data that we continue to see."
Once inflationary pressures eased in New Zealand Deutsche Bank expected the Reserve Bank to cut rates quite rapidly.
"That should weigh on the New Zealand dollar toward the late stages of 2008."
Earlier, the New Zealand dollar tumbled against the greenback, as the market reacted to the dovish tone of last Thursday's interest rate review in this country against the backdrop of a strengthening US currency.
