The New Zealand dollar rose to a new-post float high on speculation the domestic economy is recovering faster than the central bank had forecast, making the nation's interest rate prospects relatively more attractive.
The kiwi dollar rose as high as 83.30 US cents ahead of the release of the Institute for Economic Research's quarterly business survey, which showed optimists outnumbered pessimists in the second quarter, adding to evidence the economy is gathering pace.
The currency was recently at 83.22 cents, up from 82.95 cents yesterday.
"The data is consistent with the story of an economic recovery," said Mike Burrowes, a market strategist with bank of New Zealand.
The economy looks to be "recovering faster than a lot of people expected, and that's building expectations that the Reserve Bank will start to hike rates in December or January."
The economy expanded 0.4 per cent in the first quarter, according to a Reuters survey. That would be the fastest since the 0.7 per cent expansion in the same quarter last year and would exceed the 0.3 per cent pace forecast in the Reserve Bank's June monetary policy statement.
The figures are released on Thursday.
Governor Alan Bollard said in his June monetary policy statement that Canterbury's February 22 quake had a smaller and more localised impact on the economy than feared.
He's is forecasting gross domestic product will speed to a 1.2 per cent pace in the fourth quarter as the rebuild of Christchurch stokes activity.
The QSBO showed confidence bounced back strongly in the second quarter, with a net 31 per cent of firms optimistic about the outlook for the immediate future, compared with net 11 per cent pessimism in the March survey.
Stronger economic figures also highlight the divergent paths between New
Zealand and Australian economies, where there is concern the mining-fueled economic expansion is losing puff.
The Reserve Bank of Australia is widely expected to keep official interest rates on hold at 4.75 per cent when it meets later today, with market betting the bank will hike rates by 6 basis points over the next 12-months according to the Overnight Index Swap curve.
By contrast, the Reserve Bank of New Zealand is seen to be raising then official cash rate by 67 basis points over the same period, narrowing the theoretical gap between the two countries' benchmark rates to 1.6 percentage points.
The kiwi dollar is trading at 77.41 Australian cents, up from 77.18 cents yesterday.
NZ dollar hits post-float high as recovery builds
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