The New Zealand dollar hit a six-year high against the yen this morning and may trend higher this year reflecting the divergent paths of the nations' central banks.
The kiwi touched 86.90 yen this morning, the highest level since February 2008, and was trading at 86.85 yen at 8am in Wellington, from 85.67 yen at 5pm on Friday. The local currency advanced to 82.81 US cents, from 82.72 cents at the New York close and 82.16 cents in Wellington Friday.
The New Zealand dollar has rallied 18 percent against the yen the past year as New Zealand's Reserve Bank moves to tighten interest rates to cool a reviving local economy while the Bank of Japan has pledged to keep interest rates low and eyes the prospect of further stimulus to boost inflation.
"The anticipation of pending rate rises, whether it comes in January or March, is adding to the strength of the kiwi dollar," said Stuart Ive, senior adviser at OMF. "The yen is weakening. They are stimulating their economy and will continue to do so for at least the next year and a half.
"It's the tale of two cities between the central banks, we have one that has clearly signalled they intend to raise rates in the near future whilst on the Japanese front they have no intention to do such a thing."
