KEY POINTS:
The dollar will either be a lot higher or a lot lower by the end of the year - depending on the forecaster.
As the kiwi hit another fresh high of US77.60c against the greenback yesterday, many economists have increased their forecasts for the currency during the past couple of months.
But the variations in forecasts are much larger than usual and depend on views of when the economy will cool.
Westpac expects the kiwi to average US79c in the December quarter. However, ANZ expects the currency to be at US69c by year end, although chief economist Cameron Bagrie says it could be as low as US65c.
Bagrie said he believed the economy was close to slowing sharply because Reserve Bank Governor Alan Bollard was determined to bring about a slowdown this year and the high currency was already hurting the economy.
"This economy is going to unwind pretty quickly and, when it does unwind, you're going to see the currency get absolutely belted," he said.
"When it goes, it's going to go 10 cents in three months and I still think it will be this year."
Westpac market economist Sharon McCaw said the bank had increased its December forecast for the kiwi to US79c from US74c last month after the 8 per cent surge in dairy prices since the start of June.
The ongoing rise in commodity prices and interest rates remaining high would push the kiwi higher. "We don't see dairy prices coming down any time soon and, therefore, we don't see interest rates coming down any time soon either."
Bank of New Zealand head of market economics Stephen Toplis said the variations in forecasts were mainly due to differences in timing rather than differences in opinion.
"Everybody thinks the currency is unsustainably high and it will correct sharply at some stage," he said.
"What we're less clear about is what that catalyst is going to be for the move and when."
However, that was likely to be a growth slowdown.
BNZ is forecasting the currency at US73c by year end, up from US68c three months ago.
Year-end Kiwi forecasts
* Westpac US79c
* BNZ US73c
* ANZ US69c
