KEY POINTS:
The New Zealand dollar reached its highest level against the greenback since late-January early today before falling away abruptly around 5am.
The kiwi topped US69.70c before the fall and around 8am was down to US69.35c.
The ANZ bank said carry trade liquidation was the main theme during the past 24 hours, with the NZ dollar looking soft on several crosses. An expected hike in New Zealand interest rates was already priced into the kiwi and there was nothing to support it now.
The US dollar was weakened overnight by data showing the first monthly net outflow from US capital markets in nearly two years.
But it recovered some ground after Federal Reserve chairman Ben Bernanke told Congress that the US economy may be stronger than some believe.
Against the yen, the greenback fell to a one-month low in one of its biggest daily falls since June 2006, with the Japanese currency already higher after a report showed Japan's economy advanced at a 4.8 per cent annualised pace in the fourth quarter.
Traders said that sparked investors to unwind carry trades that had bet on a further yen decline.
Low Japanese interest rates have pushed investors to borrow yen cheaply, sell it for higher-yielding currencies, and profit on the spread, a strategy that keeps the yen under pressure.
The NZ dollar is one of those higher yielding currencies and it weakened against the yen at the same time as it did against the greenback, dropping from above 83.50 to bottom around 82.65 before recovering slightly to be around 82.80 at 8am.
The kiwi was also buying A88.43c shortly after 8am, from A88.52c at 5pm yesterday, and 0.5280 euro from 0.5283. The trade weighted index was at 68.59 from 68.67.
- NZPA