KEY POINTS:
The New Zealand dollar ended the week firmly ensconced above US80c and not a word in the market about the possibility of Reserve Bank intervention.
The kiwi closed on its high of US80.16c having closed yesterday just below US80C.
In the middle of last year, when the kiwi first hit the US80c, the Reserve Bank said it was exceptionally and unjustifiably high, prompting another bout of intervention.
But this month's rise is primarily based on US dollar weakness.
The Australian dollar was also strong against the greenback, closing on US91.89c while the kiwi crossrate rose to A87.20c from A87.00c yesterday.
The US dollar fell to two-week lows against a basket of major currencies after data showing a much sharper-than-expected contraction in US Mid-Atlantic factory activity this month made investors brace for more Federal Reserve rate cuts.
"(The Philadephia Fed survey) is a big black eye for dollar bulls. It's really starting to confirm the notion that the US economy is slowing considerably," said Boris Schlossberg, senior currency strategist, at DailyFX.com in New York.
Many market players expect the Fed to slash overnight rates by another 50 basis points at its next meeting in March to 2.50 per cent, following an unusually aggressive 125 basis points of cuts in January to help fend off a recession.
In contrast to Fed expectations, investors are scaling back expectations for European Central Bank rate cuts this year as French inflation rose to its fastest annual pace in at least 11 years,
That should keep the pressure on the dollar, as investors have more incentive to hold higher-yielding euro-denominated debt over US debt.
Some traders said Japanese institutional investors were selling foreign assets and repatriating funds, limiting gains in the Australian dollar, New Zealand dollar and sterling against the yen.
While concerns about global credit markets have eased a bit and some investors resumed risky carry trades, traders said more time was needed before investors' risk appetite returned fully.
"Speculators are currently leading the market, with real money investors largely keeping to the sidelines because they lack confidence in taking risks," said a general manager of currency trading at a big Japanese trading house.
The NZ dollar trade weighted index closed on 73.23 against 73.35 yesterday.
Currency rates:
NZ dlr/US dlr US80.16c US79.99c
NZ dlr/Aust dlr A87.20c A87.00c
NZ dlr/euro 0.5414 0.5434
NZ dlr/yen 86.07 86.50
NZ dlr/stg 40.77p 41.18p
NZ TWI 73.23 73.35
Australian dollar US91.89c US91.94c
Euro/US dollar 1.4804 1.4723
US dollar/yen 107.37 108.12
- NZPA
