By Joe Helm
Monetary conditions finished at their tightest level since August last year yesterday as the New Zealand dollar surged and wholesale interest rates held steady.
The Monetary Conditions Index stood at minus 86 at 3 pm, up from minus 109 24 hours earlier.
That was the lowest reading in the index, or the tightest monetary conditions, since August last year.
Conditions tightened as the dollar climbed 18 points to an eight-week high of 53.98USc and wholesale interest rates remained unchanged.
In London trading during Monday night the kiwi peaked at 54.43c after finishing here on Monday evening at 53.8c.
Some market observers attributed the London buying to institutions and others building up currency to buy Contact Energy shares. Others said it was due to European investors seeking higher yields here after recent interest cuts in Europe.
There was also some buying to cover short positions in the kiwi.
A commentary from HSBC Markets yesterday predicted the kiwi would slowly appreciate in value to reach 57USc by the end of June.
John Fulton, senior client adviser at Bancorp said he expected quite a big pullback in the value of the kiwi but did not put a figure on it.
Climbing kiwi tightens money market
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