Dollar starts new climb

File photo / Dean Purcell

The New Zealand dollar reached a seven-week high against the greenback yesterday on further evidence of rising commodity prices while investors continued to be more comfortable with risk.

The NZ dollar was at US76.92c at 5pm from US76.87c at 8am and US76.13c at 5pm on Friday. It rose as high as US76.97c, a level last seen in mid-February.

"Once again some commentators have assumed a lower NZ dollar is a result of a poor domestic outlook, which is clearly not the case," Rankin Treasury said.

"The NZ dollar is driven by the value of commodities, the US dollar and the Australian dollar, and that still means an eventual retest of the 2011 highs of US78c and beyond."

As if to reinforce those sentiments, the ANZ Commodity Price Index released yesterday lifted 4.7 per cent in March to a new record high. It was the seventh consecutive monthly rise in the index, with the latest month also being stronger than any of the preceding six-monthly increases.

Westpac said the US77.20c level was pivotal.

"Technically, the NZ dollar is rising towards the top of a multi-month channel which started on November 5. Once it reaches the boundary at US77.20c, we will look for clues on whether a reversal to the bottom at US71.50c or a break higher to US80c is more likely to eventuate," Westpac said.

NZ dollar buying by Swiss and German reinsurers, or expectations that they would be buyers, was also a feature which might persist for a few more months.

The European Central Bank was also expected to raise rates this week, the first of what some predicted would be several rate increases scattered throughout the year.

The Bank of Japan was widely expected to lag behind the United States Federal Reserve and the European Central Bank in raising interest rates, especially after the March 11 earthquake and tsunami.

Analysts said that would enhance yen carry trades, which involved borrowing yen cheaply to finance more lucrative trades in higher-yielding currencies and assets.

The NZ dollar rose to its highest level against the Japanese currency in more than four months, buying 64.74 at 5pm yesterday from 63.74 at 5pm on Friday.

It was €0.5406 from €0.5374 on Friday and A74.04c from A73.56c. The trade weighted index rose to 67.34 at 5pm yesterday from 66.79 at the same time on Friday.

- NZPA