KEY POINTS:
The New Zealand dollar today shrugged off horror trade data for October as well as talk investors were losing their appetite for high yielding currencies like the kiwi.
It nudged back above US67c by the close, ending on US67.05c after dipping to US66.78c shortly after news of the second worst monthly deficit on record.
The kiwi ended on A86.45c against the aussie from A86.72c and the trade-weighted index finished on 66.48 from 66.65 yesterday.
The October trade deficit printed at $1.167 billion -- about double what economists had predicted.
It was driven by a massive spending spree on imports as New Zealanders took advantage of the resurgent New Zealand dollar to buy cheap imports.
The figures cast doubt on forecasts of an improvement in New Zealand's chronic current account deficit and the recovery of the export sector.
Goldman Sachs JBWere economist Shamubeel Eaqub said the Reserve Bank remained in a difficult position, with "cheap" imports directed at the domestic economy and signs of a failed recovery in the export sector.
Bank governor Alan Bollard has threatened to hike interest rates again and is due to review rates again on December 7. However, another hike would cause the New Zealand dollar to spike higher and would exacerbate the trade problem.
"On balance, the data poses no catalysts for the RB but it doesn't provide any comfort either," Mr Eaqub said.
UBS economist Robin Clements at the end of the day the trade data was bad for the currency'."
BNZ currency strategist Danica Hampton said talk of carry-trade unwinding continued to be the main reason for the New Zealand dollar's underperformance overnight.
ANZ bank said the failure of the New Zealand dollar to even move above US67.20c yesterday and overnight was telling.
"Significant USD weakness will have a limited impact on the NZD that is struggling to maintain the pace."
Trading in the major currencies was affected by US and Japanese holidays. The euro hit a 5-1/2-month high against the dollar for a second day, boosted by a strong German business sentiment reading.
The Ifo business climate index unexpectedly rose to 106.8 in November from 105.3 the previous month, far outstripping forecasts for a fall to 105.2.
The data sparked buying in euro/dollar, which in turn led to a broad selling of the US currency, sending it to 5-1/2 month troughs against an index of currencies and two-month lows against the yen.
Rates:
5pm today 5pm yesterday
NZ dlr/US dlr US67.05c US67.13c
NZ dlr/Aust dlr A86.45c A86.72c
NZ dlr/euro 0.5174 0.5192
NZ dlr/yen 77.99 78.36
NZ dlr/stg 34.99p 35.07p
NZ TWI 66.48 66.65
Australian dollar US77.58 US77.43
Euro/US dollar 1.2958 1.2930
US dollar/yen 116.29 116.69
- NZPA