The New Zealand dollar pared its losses overnight after better-than-expected US manufacturing data bolstered demand for growth linked currencies, arresting the slide seen after the Reserve Bank of Australia's rate cut.
The kiwi recently traded at US81.53 cents, up from US81.47c at 5pm yesterday, while on the Trade Weighted Index of major trading partners' currencies it rose to 72.41 from 72.35.
Investors appeared to shrug off a softer start to the week after Institute for Supply Management data showed a surge in US manufacturing activity, boosting bets that the recovery of the world's biggest economy is still proceeding apace.
The release followed hot on the heel from the Chinese Performance of Manufacturing Index figures yesterday, with the official data showing the manufacturing sector has remained in expansion for a fifth consecutive month.
That proved enough of a distraction for investors to push yesterday's bigger-than-expected Australian interest rate cut as well and a further slide in milk powder prices at Fonterra's latest GlobalDairyTrade Auction to the sidelines, with the kiwi and the aussie posting modest gains versus the greenback overnight.
"The nuts and bolts of it were that the US data was better and the China data not too shabby either," said Alex Sinton a director of institutional FX at ANZ New Zealand. "The Australian rate cuts had a fair amount priced in, and we've held up reasonably well."
Australia's central bank cut the country's cash rate by 50 basis points to 3.75 per cent, and GDT TWI Index fell 2.4 per cent at the latest Fonterra sale, with an average winning price of US$2,843 per metric tonne.
On Wall Street, the Standard & Poor's 500 Index rose 0.7 per cent to 1407.96 in afternoon trade, while Europe's Stoxx 600 Index close 0.7 per cent lower at 257.28.
On the crosses, the kiwi recently traded at 78.91 Australian cents, up from A78.823c at 5pm yesterday, and it rose to 65.35 yen from 65.08 yen. It gained to 61.60 euro cents from 61.51 euro cents, and was little changed at 50.27 pence from 50.23 pence.
The kiwi may trade between a range of US81.20c and US81.90c, Sinton side, with further sideways moves likely.