The New Zealand dollar got a strong lift from positive jobs data today but pared the gains late in the day ahead of tomorrow's Reserve Bank's monetary policy review.
That is when it may attempt to jawbone the currency lower.
The kiwi rose as high as US73.45c after government data showed a lower-than-expected unemployment rate, and traded at US73.07c as at 5pm in Wellington, up from 72.63c in Asia Tuesday.
Markets were closed for the Waitangi Day holiday Tuesday, avoiding much of the major market volatility of the past two days when stronger US jobs numbers stoked inflation expectations and eroded stock markets around the world.
Things settled down and a resumption of risk appetite coincided with higher dairy prices at the GlobalDairyTrade auction, stoking demand for the kiwi.
The local currency got a further lift when Statistics New Zealand data showed the unemployment rate unexpectedly fell to 4.5 per cent in the December quarter to the lowest level since the December 2008 quarter.
"Risk aversion dissipated very quickly ... overseas markets turned around and said it's all good now," after a global sell-off earlier in the week, said Imre Speizer, senior market strategist at Westpac.
Investors were cheered when the Dow Jones Industrial Average ended up 2.3 per cent. "Then we had our good jobs data, which gave us another leg up," he said.
Mr Speizer said the kiwi pared some of those gains late in the trading day, which could be due to concern that "tomorrow we may get a strong warning that the kiwi dollar is too high" from the central bank.
The local currency rose to 79.89 yen from 79.23 yen and gained to A92.68c from 92.18c. It increased to 58.98 euro cents from 58.72 cents Tuesday and rose to 52.34 British pence from 52.03 pence. The kiwi traded at 4.5698 Chinese yuan from 4.5648 yuan.