THE dollar opened more than 1c higher today as a "bear market correction" took hold after US equities surged overnight.
The local unit rallied more than US3c in the past 24 hours, bouncing off a low of US$0.8203 yesterday.
At 7am (AEST) today, the dollar was trading at $US0.8514/18, up 1.89 per cent from yesterday's close of $US0.8356/58.
Since 5pm (AEST) yesterday, the local unit traded between $US0.8394 and $US0.8516 during the offshore session.
Westpac New Zealand senior market strategist Imre Speizer said the rally in the dollar began in the domestic session yesterday.
"It's really gone in a straight line and just extended the daytime rally overnight," Mr Speizer said from Wellington.
"It's at least a short term correction of the whole big sell off and loss, but I would be sceptical to see it as the beginning of an uptrend.
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"I would characterise it more as a bear market correction."
US Stocks surged and the euro snapped a three-day decline against the US dollar as China said it remains a long-term investor in Europe, easing concerns that the region's debt crisis will worsen.
"The story that China denied they were going to sell eurozone bond holdings was already out in the Aussie daytime yesterday, but it gained more traction in the European and New York sessions," Mr Speizer said.
"That's what pushed US equities higher and that's what then in turn pushed the currencies higher, as well."
The dollar is now almost US5c higher than its low of US$0.8059 on Tuesday, according to IRESS data.
Mr Speizer said the overnight rallies were supported by news that Kuwait had denied it would sell eurozone bond holdings.
He said the local unit had now rallied from a "severely oversold condition".
"It needed to bounce back, if for no other reason than to correct the sell off from US93c."
Mr Speizer predicts the correction target will fall between US$0.8570 to US$0.8730.
"I think that is achievable within the next 24 hours," he said.
Any pullbacks should be restricted to US84c.
With no significant data due during today's domestic session, he said there were unlikely to be any catalysts until Asia entered the market.
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