By ELLEN READ and AGENCIES
Continued United States dollar weakness has pushed the kiwi above 60USc for the third time this year and most currency strategists are expecting it to hold its gains.
After hitting 60.19USc in overseas trade on Wednesday, the NZ dollar spent yesterday hovering around 60USc.
While that has shown itself to be a strong resistance level, ANZ director of foreign exchange John Body says the kiwi will make a sustained breakthrough this time.
"It's building a base here. There's lots of offshore investment interest in the kiwi too," he said, due to New Zealand's relatively high interest rates and the strength of the economy.
ANZ has lifted its end of year forecast to 62.5USc from 61USc.
The kiwi has gained 27 per cent against the US dollar in the past 12 months, making it the world's fourth-best performer.
"We've got a rapidly widening current account deficit in large part because of the rise in the level of the New Zealand dollar," Finance Minister Michael Cullen said.
"Sooner or later I think the financial markets will recognise that that means they need to look carefully at that aspect of the New Zealand economy."
The annual current account deficit widened to $5.89 billion in the year to June 30, up 18 per cent from the 12 months to March 31, according to government figures last month.
The kiwi has topped 60USc already this year but failed to hold.
On September 23 and October 1 it peeked over the 60USc mark at, respectively, 60.08USc and 60.05USc. On July 8, the kiwi hit 60.23USc, its highest since December 1997.
It is also getting a boost from rising Asian currencies. Since last month's G7 call for more exchange rate flexibility from Asian nations to help iron out global economic trade imbalances, Asian currencies have strengthened - at the greenback's expense - and that sentiment is boosting the kiwi.
Westpac senior currency strategist Johnathan Bayley said while recent greenback weakness has benefited the yen and European currencies most, the antipodeans have started to play catch up.
US data issued this week - a weak consumer confidence report and generally good but not as positive as expected manufacturing figures - has undercut the greenback.
That news will not please exporters. A Rabobank survey of farmers showed 41 per cent believed the stronger currency has had a very negative impact on their business and 45 per cent said it had a moderately negative impact.
Surprisingly, 1 per cent said it had a very positive impact.
Not everyone is expecting the kiwi to end the year on a higher note.
Citigroup's end of year forecast is below consensus at 58USc.
Economist Annette Beacher said the bank's view is that the US dollar pounding post-G7 communique is overdone, and the Japanese authorities will carefully manage the yen's progress so as to not stifle the fledgling recovery.
While picking the US' twin deficits will lower the currency in the medium-term, Citigroup expects a higher shot term greenback on further evidence of economic recovery, especially on the overdue rebound in the jobs market, hence hampering the kiwi from trading consistently above 60USc.
Dollar tipped to stay strong
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