The New Zealand dollar held below recent highs on Friday as its high yield helped to offset investor caution and risk aversion over conditions in global credit markets. The kiwi settled just below $0.7800 after a volatile previous 24 hours, which had seen the currency fall sharply on risk aversion and weak data and then partially recover.
Dealers said the main driver of markets was renewed weakness in the US dollar and concerns there was more bad news to emerge because of the credit market turmoil.
"We're back to familiar themes - greenback weakness, interest rate gaps and yield on the one side, and unwinding carry trades and risk aversion on the other," said a dealer at a local trading bank. "At the moment they're roughly balanced, but with a slight bias to a stronger kiwi."
The kiwi was sitting at $0.7778/88 compared with $0.7712/19 in late local trade on Thursday. It traded a $0.7754 to $0.7821 range in the local session. It was not moved by data pointing to a slowing in the housing market, where a recent surge has become a major inflation worry for the Reserve Bank of New Zealand.