The US dollar slipped as investors shifted funds to higher-yielding currencies following robust New Zealand consumer spending data.
The New Zealand dollar jumped nearly half a per cent after a report showed retail sales rose 3.8 per cent in the first quarter from the previous quarter, the strongest since the data series began in 1995.
The figures contrasted with data today showing an unexpected drop in US retail sales in April and suggested New Zealand's central bank may be forced to lift rates further from 7.75 per cent, already the highest among industrialised countries.
The New Zealand data also highlighted the strength of economies outside the United States that has hurt the dollar, with the Federal Reserve widely expected to trim rates from 5.25 per cent late this year to help reverse a slowdown.
But traders said the market was also cautious about investors cutting back on risky positions like carry trades, in which low-yielding currencies like the yen are used to fund purchases of higher-yielding currencies like the kiwi.
A pull-back in global equity markets last Thursday prompted some players to unwind carry trades, but the risk reduction was short-lived as stocks recovered.
The Nikkei share average gained more than 1 per cent today. The dollar was little changed near 120.20 yen holding close to a two-month high of 120.54 yen hit last week.