A sky-rocketing New Zealand dollar softened a little at the close yesterday after hitting a new 2 1/2-year high above the key 50USc level.
At 5pm the kiwi traded at 49.97USc, a gain on the previous close of 49.65USc but well below its session high of 50.17USc.
On the kiwi-Aussie cross, the New Zealand dollar touched 89Ac briefly, its highest level since January 1998, before slipping to close at 88.77Ac.
Business leaders are keeping an eye both on the kiwi's strength against the US dollar, a major trading currency, and against the Aussie because of Australia's stature as an export market.
"We can cope with the dollar at around that 50USc mark, and even ultimately rising 55USc probably, as long as it doesn't rush up there too fast. It is certainly a good indication that we don't need to raise interest rates in New Zealand," said Alistair Thompson of the Northern Employers and Manufacturers' Association.
The New Zealand dollar has steadily risen since September last year, in line with other currencies. But it has done better than most due to attractive interest rate yield differentials and a strong economy.
"There is some doubt about Australia's capacity to sustain its current level of growth if the global economy is weak, whereas people are more confident New Zealand will retain its growth," said ANZ Investment Bank's head of foreign exchange, John Body.
BNZ currency strategist Stu Ritson said the kiwi looked a little rich at present levels and might pull back slightly in the short term, but could now reach 51.5USc by the end of the year, helped by the seasonal domestic demand.
" ... If the US dollar's going to go down, there aren't that many better places to play a short US dollar than the kiwi," he said.
Ritson said the kiwi could hit the "big psychological level" of 90Ac in a couple of weeks.
Overseas the greenback ended New York trade broadly firmer after signs US consumer spending was still robust.
US investors were comforted by retail sales data and, to a lesser extent, weekly jobless claims in the wake of lingering fears about the US economy since the Federal Reserve cut interest rates last week.
The US dollar closed in New Zealand at 120.75 yen (120.34 yen Thursday), and gained slightly on the euro which was buying $US1.0034 ($US1.0060).
On the crosses the kiwi was buying 0.4980 euro (0.4936 Thursday), 60.34 yen (59.75), 31.64 pence (31.36), and 0.7306 Swiss francs (0.7237). The Australian dollar was buying $NZ1.1272 ($NZ1.1274)
The 90-day bank bill yield was steady at 5.90 per cent and the New Zealand dollar trade-weighted index was at 56.65 (56.26). The monetary conditions index tightened significantly to minus 150 (minus 185).
- NZPA
<i>Currency:</i> Close eye on firming kiwi and greenback
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