The New Zealand dollar rose to a record against the Australian dollar as investors favour the outlook for the local economy, increasing the possibility the two currencies may reach parity.
The kiwi hit 96.77 Australian cents, beating its previous post-float high of 96.52 touched last month, and was unchanged at 96.34 cents at 8am in Wellington, from its level at 5pm yesterday. The local currency slipped to 74.81 US cents from 75.05 cents yesterday.
The kiwi has gained 3 per cent against the Aussie so far this month after the Reserve Bank of Australia cut interest rates to a record low 2.25 per cent while New Zealand's central bank signalled rates were likely to remain on hold at 3.5 per cent. Investors were buoyed by strong New Zealand retail sales and services data yesterday, and all eyes will now be on the GlobalDairyTrade auction overnight as prices for New Zealand's largest commodity export improve, while in Australia iron ore prices remain subdued.
"It's really the divergent external and internal views of the two economies," said Sam Tuck, senior FX strategist at ANZ Bank New Zealand. "While that dynamic continues it's pretty hard to see the New Zealand dollar underperforming the Australian dollar which is what would be required for it to head back in the other direction, and it's fairly easy to construct cases where the New Zealand dollar continues to outperform."
The kiwi may advance further as investors favour selling the Aussie against the US dollar, rather than the kiwi, he said.
