KEY POINTS:
The New Zealand dollar failed to hold above US74c today and whether it makes a final push for the post-float summit could depend on tomorrow's inflation data.
Having broken above US74c several times overnight, it eased back to open at US73.90c and traded a very narrow range, ending on US73.92c.
But if first quarter CPI inflation comes in stronger than the 0.6 per cent average forecast for economists, dealers said the market can expect to test the post float high of US74.65c.
ANZ chief dealer Murray Hindley said if CPI was higher than forecast it would put even more pressure on an already hard pressed Reserve Bank to increase rates further on Thursday week.
Monetary conditions are already close to the tightest they have been in at least a decade but RB governor Alan Bollard has been struggling to contain inflation because of rampant consumer spending encouraged by rising house prices.
Mr Hindley said US inflation data overnight would also have a bearing on the kiwi's performance with the same factors affecting the US dollar.
US Core CPI is expected to climb 0.2 per cent on the month, matching February's gain, according to a Reuters poll.
Apart from a brief stay above US74c in March 2005, the kiwi is at its strongest in the 23 years since the kiwi was floated at US44.4c in March 1985.
It also hit a 17-year peak against the yen of 88.79, although it eased off to a 88.46 close.
Against the aussie, it closed at A88.76c from A88.75c at 5pm yesterday. The trade-weighted index closed on 71.66 from 71.57 yesterday evening.
The NZ dollar's high value is being underpinned by the country's high interest rate and the decision of the Group of Seven industrialised countries on the weekend not to warn against carry trades.
Carry trades refer to transactions in which investors borrow funds in low-yielding currencies such as the yen to invest in assets in higher-returning units like sterling.
In major currency trading, the yen hung near a record low against the euro and a seven-week trough versus the US dollar. It was expected to stay pressured after the Group of Seven appeared to give a green light to yen selling after G7 finance officials at the weekend glossed over the issue of the yen's recent weakness.
Market participants said any respite for the low-yielding yen would be fleeting as investors dump the currency for higher-yielding currencies.
Analysts say the euro will continue to climb on the view that the European Central Bank may raise rates in June and beyond.
This view helped the euro stay strong against the dollar and the single currency traded around US$1.3540 little changed on the day and hovering near a two-year high around US$1.3570 hit yesterday.
Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US73.92c US73.90c
NZ dlr/Aust dlr A88.76c A88.75c
NZ dlr/euro 0.5460 0.5453
NZ dlr/yen 88.46 88.21
NZ dlr/stg 37.15p 37.18p
NZ TWI 71.66 71.57
Australian dollar US83.29c US83.25c
Euro/US dollar 1.3538 1.3555
US dollar/yen 119.62 119.34
- NZPA
