By ELLEN READ and agencies
The New Zealand dollar - which has risen 3USc since Christmas - is not the only currency off to a flying start against the United States dollar.
The greenback has begun the new year the same way it ended the old one - weakly.
Concerns about the country's gaping trade deficit combined with little immediate hope of higher US interest rates mean the greenback has taken a hammering.
It has hit a record low against the euro, an 11-year low against the pound and multi-year lows against other currencies.
Rumours of yen-selling intervention by the Bank of Japan have halted the greenback slide there, although it remains near three-year lows.
"Overall, there are very few technical or policy barriers to limit the [US] dollar's fall right now," said Patrick Brodie, chief dealer at SMBC in New York.
The pound reached US$1.8277 this week - its highest level since September 1992 as expectations of higher interest rates in Britain gave the currency an added edge.
The euro has also reached record highs against the greenback, prompting talk the European Central Bank might be less likely to raise interest rates now.
The US has a 1 per cent interest rate, the euro zone 2 per cent and Britain 3.75 per cent.
This week the greenback has also hit a three-year low of 106.01, and many analysts believe Japanese monetary authorities have been selling yen for dollars in hopes of curbing dollar losses below 106.
The Bank of Japan has not confirmed any intervention but last year it spent a record 20 trillion in intervention to curb the yen's export-damaging gains against the dollar.
The country's biggest business lobby, the Japan Business Federation, said this week that it was vital for Japanese firms exporting to the United States that the dollar stayed above 105.
As the greenback slides, high yielding currencies like the New Zealand and Australian dollars are in favour, and this has been behind their surges to start 2004.
The kiwi is forecast to break 72USc by the end of the year - uncharted territory since the currency floated almost 19 years ago.
The soft start to the year has prompted some banks to change their currency forecasts.
This week UBS Warburg changed its end of year euro forecast to US$1.40 from US$1.32. The bank sees the pound at US$2 and the yen at 100 to the dollar by the end of December.
"The risk of a US dollar collapse - or at least a further substantial decline - seems to be more and more likely," said chief economist George Magnus.
While the fundamentals and geo-political factors had not changed materially since the middle of last month, the balance of probabilities had, he said.
"Especially in view of trading conditions in recent weeks, the growing possibility of changes in Asia's foreign exchange management practices and the reluctance on the part of the United States monetary authorities to encourage stronger expectations of an early rise on interest rates," Magnus said.
The weak US dollar is causing havoc on world stockmarkets, too, with exporting and dollar-earning companies hard hit.
European shares have fallen as the US dollar's slide hits dollar earners such as Volkswagen and drugs firm GlaxoSmithKline.
The euro, which has climbed by more than a fifth against the dollar in the past year, hit a fresh all-time high of US$1.2812 on Tuesday, raising concern about the translation effects of a weak dollar on European company earnings and the loss of competitiveness in the key US market.
And more pain could be in the offing for European companies as observers such as currency strategist Steve Barrow from Bear Stearns predicted the US dollar would fall by a further 15 per cent against the euro this year. "It's been a tough couple of years for the dollar and it is likely to get much tougher still," Barrow said.
He added that the relatively small decline of the dollar so far when compared to past cycles, the lack of signs that the US authorities would try to stem the fall, and the size of accumulated dollar reserves created the risk of a dollar crash.
Greenback taking a hammering
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