The New Zealand dollar rallied above 84 US cents after a Group of Seven leading nations' official said the body was concerned about excessive moves in the yen, leading to broad selling of the greenback and lifting so-called riskier currencies.
The kiwi recently traded at 84.06 US cents, having climbed as high as 84.36 cents overnight, from 83.50 cents at 5pm in Wellington yesterday. The trade-weighted index climbed to 76.34 from 76.05.
Currency traders apparently misread an initial statement from the G-7, that foreign exchange rates should be determined by the market, as approval of the yen's sell-off this year of some 8.8 percent against the greenback.
That sent the yen weaker and prompted the G-7 to clarify that it was concerned about excessive movements in Japan's currency. The greenback was sold in the wake of the clarification.
"It has been a rollercoaster ride," says Mike Jones, strategist at Bank of New Zealand. "The net result is investors returned to their favourite game of bashing the US dollar."
He says the backdrop to currency markets "is still underlying risk-on. Equity markets are still rising and volatility is very low". The kiwi may trade in a range of 83.30 US cents to 84.50 cents today.
The local currency rose to 62.55 euro cents from 62.33 cents and gained to 53.73 British pence from 53.33 pence. It climbed to 81.64 Australian cents from 81.45 cents and slipped to 78.67 yen from 78.72 yen.
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