New Zealand's dollar rose to its highest level versus the dollar and yen in nearly a month following a drop in U.S. interest rates prompted a comeback for investments such as the carry trade.

It rose 4 percent on Tuesday, the biggest gain in nine years, after the Federal Reserve cut its benchmark Fed funds rate by a half-percentage point, increasing the desirability of New Zealand's assets.

It also rose 4.4 percent against the yen as traders came back to carry trades.

The New Zealand dollar traded at 85.26 yen, up from 84.73 in late Asia trade Tuesday. Carry trades using the yen rose a second day, up 0.1 percent after increasing 4.6 percent yesterday.