The New Zealand dollar rose to a four-year high against the yen after the US Federal Reserve cranked up its money printing presses, heightening the appeal of countries offering high interest rates, and as Japan's general election looks set to usher in a new government.
The kiwi rose to 70.50 yen from 69.32 yen yesterday, the first time it's climbed above 70 yen since September 2008. The currency traded at 84.39 US cents at 5pm in Wellington from 84.51 cents at 8.30am, up from 83.90 cents yesterday.
The kiwi was strong against the Australian dollar, too, pushing on 80 Australian cents and closing the day at 79.97 cents from 79.69 cents yesterday and putting new pressure on exporters to New Zealand's most valuable foreign market.
The Fed ramped up its asset purchase programme with up to $US45 billion in purchases of US Treasuries a month, and will link any future increases in its near-zero benchmark interest rate to bringing the unemployment rate down to 6.5 percent, the central bank said today.
That was yet another confirmation the world is facing an extended period of low interest rates and challenges to inflation-indexing as the primary target for monetary policy.
That stoked demand for assets offering higher yields. The New Zealand government bond auction of $250 million in two tranches of debt attracted $1.35 billion worth of bids.
"The Fed's decision today really reinforced that you've got really low yields in US government bonds for a very long time and you're getting positive yields in New Zealand bonds," says Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney.
The Fed meeting comes ahead of Japan's general election on December 16, which is expected to see the Liberal Democrat Party regain power and re-install Shinzo Abe as prime minister. The LDP has been frank its desire to weaken the yen as it deals with rising energy prices and dwindling exports.
The currency weakened to 83.58 yen per US dollar at 5pm in Wellington from 82.63 yesterday.
"Ultimately, the yen will weaken, and weaken by quite a bit. But it's not because you've got a new government; it will be because the current account has gone from a very strong surplus to negligible over the last year or so," Mr Tennent-Brown says.
The Bank of Korea held the benchmark seven-day repurchase rate at 2.75 percent ahead of next week's presidential election and after its reclusive Stalinist neighbour, North Korea, launched a rocket in spite of international sanctions.
South Korea's economy has been mixed in the latter half of the year, and is banking on a resurgent China to underscore any export growth in 2013.
The kiwi rose to 904.41 Korean won at 5pm in Wellington from 903.33 won yesterday.
New Zealand manufacturing figures showed a small contraction in activity last month as production and new orders slowed down, and analysts are looking towards next week's release of fourth quarter balance of payments and gross domestic product.
The kiwi was unchanged against the European common currency at 64.50 euro cents. It advanced to 52.30 British pence from 52.07 pence yesterday and climbed to 75.37 on a trade-weighted basis from 74.91.