KEY POINTS:
The New Zealand dollar held most of its gains today after it got a small boost from a modest rally in United States shares.
From around US76.80c at 5pm yesterday, the kiwi rose through the night to peak at a two-week high above US77.70c and then eased back to close on US77.60c.
But traders remain wary of the volatility of financial markets and perceived riskier trades such as the kiwi.
Regional players were seen dumping the US dollar and the euro even as the Nikkei share average rallied nearly 2 per cent, following a surge in US shares ahead of an expected aggressive rate slash by the Federal Reserve on Wednesday.
Global shares have fluctuated wildly in the past few weeks, recovering from a frantic sell-off after an emergency rate cut by the Fed last week kept some investors hopeful that the US central bank may be able to help steer the economy away from a recession, at least for now.
But with markets already expecting the Fed to cut rates by 0.5 percentage point after a two-day policy meeting this week, some traders doubted whether the move would spur a significant rally in US equities and, in turn, other major stock markets.
"We're still not out of the woods yet when it comes to risk aversion," said Hideki Amikura, forex manager at Nomura Trust and Banking.
Stock market moves remain a big driver for currencies, as investors use them to help determine how much to gamble on their positions. Climbing stocks often have been seen as a sign to take on more risk, resulting in selling of the low-yielding yen for higher-yielding currencies like the kiwi.
Against the Australian dollar the kiwi was buying A87.49c from A87.44c at 5pm yesterday.
The trade weighted index closed today on 71.30 from 70.84 at 5pm yesterday.
Currency rates:
NZ dlr/US dlr US77.60c US76.81
NZ dlr/Aust dlr A87.49c A87.44c
NZ dlr/euro 0.5255 0.5235
NZ dlr/yen 82.69 81.77
NZ dlr/stg 39.10p 38.87p
NZ TWI 71.30 70.84
Australian dollar US88.70c US87.86c
Euro/US dollar 1.4767 1.4676
US dollar/yen 106.50 106.47
- NZPA
