Just 12 days into the new year, exporters without foreign exchange cover are burning.
A 4 per cent rise in the New Zealand dollar against the US dollar this year has made life a lot easier for importers but turned the heat up on exporters who get less when US sales are converted to New Zealand dollars.
To put it in perspective, the New Zealand dollar is now about 15 per cent above its long-term average.
Yesterday it spurted a third of a cent to a new six-and-a-half-year high of 68.33USc.
As was the case last year, the real trend was selling of the US dollar globally, because weak employment data reduced the chance of a US interest rate increase.
The US dollar has lost a fifth of its value against the euro and a tenth against the yen in the past 12 months, boosting US exporters' sales in an election year but threatening export-led economic recoveries in Europe and Japan.
The global realignment of currencies is expected to be discussed by central bankers from the G-10 nations meeting in Basel, Switzerland, this week.
The Bank of Japan has been trying to stem the yen's rise but the US was happy with developments, according to analysts.
The magnitude of the rise in the kiwi so far this year has defied forecasters, though its impact can be mitigated by financial instruments.
Carter Holt Harvey, the nation's largest forest owner, expects this year to convert 80 per cent of its export cashflows at 48.67USc. Last year it had 100 per cent cover at an average 43.26USc.
Wayne Coffey of the Timber Industry Federation said his members also had protection but dealing with the currency was a gamble.
Bank of New Zealand head of market economics Stephen Toplis said: "Most people here at the moment are only feeling the currency movement through to the mid-50 US cent level."
Any small exporters without forward cover would be hurting, he said.
The balance of risk was for more appreciation of the currency until the middle of the year.
The New Zealand dollar peaked around 71USc in late 1996 when a sustained period of appreciation put pressure on the export sector.
"One of the interesting issues is: have we fully understood what damage it might do to the economy in six to eight months' time," said Toplis.
The risk of a bumpy ride, or hard landing, had increased.
But there was nothing either politically or economically desirable that could be done to manage the exchange rate.
"What we are talking about is a weakening US dollar and there is nothing we can do here to turn the US dollar around," he said.
He said currency strategists had been expecting a 70USc peak but later rather than sooner.
Exporters without dollar cover hurting
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