The New Zealand dollar today continued a steep rally that has seen it pile on over 3 per cent in the past week.
At 5pm the kiwi was buying US70.88c, having briefly nudged a high of US70.97c during the day. This time last week it was buying around US69.23c.
The kiwi's strength is due largely to US dollar weakness . On a trade-weighted basis -- against a basket of major currencies -- it has added a more modest 0.5 per cent in the past week , to close at 70.36 (70.34 on Friday).
The US dollar has been on the back foot due to uncertainty about how high US interest rates will climb and how much Hurricane Katrina will curb economic growth.
The Fed has raised its funds rate 10 straight times since June 2004 to 3.50 per cent, with the rate advantage helping to propel the US dollar up 8 per cent against the euro and up 7 per cent versus the yen this year.
Previously, many traders and analysts had expected two or three more rate hikes by year's end. But many market players have revised their forecasts, seeing one or two more rate rises and the end of the current tightening cycle soon.
Some have even started to think the Fed might skip a rate increase at its monetary policy meeting this month due to Katrina.
"The cyclical bull story that provided the foundation for the US dollar's rally through much of the first half of 2005 has dissipated markedly," Bank of New Zealand currency strategist Sue Trinh said.
In Wellington, the euro closed on US$1.2573 compared to US$1.2486 on Friday, while the greenback slipped to 109.11 yen from 109.87.
On its crosses, the kiwi was buying A92.22c (A92.34c), 0.5637 euros (0.5647), 0.8690 Swiss francs (0.8711), 38.36 British pence (38.47) and 77.32 yen (77.47).
The monetary conditions index closed on 1049 (1047).
On the money market, 90-day bank bill yields closed firm on 7.05 per cent. July 2009 bond yields closed on 5.60 per cent (5.56), while the April 2015 yields were at 5.61 per cent (5.57).
- NZPA
<EM>Currency:</EM> Kiwi rides high on weak greenback
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