Dollar rebounds strongly

After plunging to its lowest level in about a year against the greenback yesterday afternoon, the New Zealand dollar has since rebounded strongly.

By 8am today the kiwi was buying US70.42c, from a low yesterday around US68.25c hit as Japanese investors offloaded the currency.

The kiwi had fallen from around US70.80c on Monday evening and in its overnight rebound got up to near US70.60c.

Bank of New Zealand currency strategist Danica Hampton said the NZ dollar was pressured yesterday by heavy selling from a variety of Asian accounts.

Those flows appeared to be a mix of position squaring from speculative retail accounts and real money selling as longer term investors bailed out of NZ dollar denominated assets, she said.

But the kiwi's weakness against the greenback proved to be short-lived.

Technical indicators suggested the NZ dollar was "oversold" against the US currency, and there was concern the sharp slide in the trade weighted index may mean the Reserve Bank was more measured about cutting interest rates, Ms Hampton said.

In that environment market participants were quick to take profits on short NZ dollar positions.

Against the Japanese currency the kiwi tumbled to a two-year low around 73.90 yen, but then rebounded to be at 77.14 yen by today's local open, ahead of the 76.33 yen the kiwi was buying 24 hours earlier.

The kiwi also continued its climb back against the Australian dollar, getting to around A80.50c early today, the highest level in about two months, up from A79.78c at yesterday's local close.

Against the euro, the NZ dollar was buying 0.4717 at 8am from 0.4678 at 5pm yesterday. The trade weighted index rose to 65.24 from 64.60.

- NZPA