NZ dollar keeps on climbing

The rise and rise of the NZ dollar continued today.

It climbed above US70c just before 5am and rose through the day to be worth US70.40c at 5pm.

It hit a new one-year high and at the end of the day, was still rising, hitting US70.52 a few minutes after 5pm, despite Reserve Bank Governor Alan Bollard's clear concerns about the dollar's relentless rise,

The ascent of the kiwi came amid improving risk appetite as world stock and commodity prices rose, and as the US greenback fell to its lowest level in nearly a year against a basket of major currencies.

Announcing yesterday that the official cash rate was remaining at the record low 2.5 per cent, Dr Bollard said the sustainability of the present "patchy" recovery would be brought into question if the exchange rate were to continue its recent rise.

Today BNZ analyst Danica Hampton said that "huffing and puffing" would not be enough to talk down the NZ dollar exchange rates.

If the trade weighted index (TWI) - which climbed to 64.21 points today - continued to appreciate over the coming months to around 70 points she expected the Reserve Bank to again start adding to foreign reserves. Last summer, over November to February, it bought about $1.2 billion of the NZ dollar.

But Ms Hampton noted the TWI was still 20 per cent below its 77.25 peak in mid-2007, and said that though the Reserve Bank was uncomfortable with the strength of the economy, it "appears almost resigned to the fact that there is relatively little it can do about it".

The ANZ bank said it shared Dr Bollard's concerns about the sustainability of any recovery and the need for the economy to rebalance.

The kiwi looked like it had the momentum to push higher, ANZ said.

"At present, markets are ignoring NZ's domestic economic fundamentals and trading is driven more by risk appetites and hopes of reflation.

"Something will have to give eventually. But knowing when and what the catalyst will be is incredibly difficult."

The NZ dollar was still at A81.46c against the Australian dollar at 5pm - on a par with its 8am rate - from A81.11c at 5pm yesterday.

It fell slightly to 0.4820 euro from 0.4823 earlier in the day, and to 64.29 Japanese yen from 64.50 over the same period. The trade weighted index was 64.24 at 8am and 64.21 at 5pm.

- NZPA