KEY POINTS:
An overnight easing in the New Zealand dollar proved short-lived as it headed back towards historic highs against the greenback by today's local close.
It closed today at US79.32c, not far from yesterday's post-float high of US79.43c and above yesterday's US79.20c close.
However, it did ease on some of the other crosses, particularly against the aussie dollar where it fell to A90.30c from A90.69c at 5pm yesterday.
The trade-weighted index only eased to 75.75 from 75.81 after it hit a record of 76.08 mid-session yesterday.
Concern expressed by politicians, economists and manufacturers about the high currency failed to dent trader enthusiasm.
Finance Minister Michael Cullen said there was nothing he could do in the short-term although opposition National MPs called on the Government to cut spending.
There was some comment that three times in parliament Dr Cullen referred to special powers he had under the Reserve Bank Act to suspend the Policy Targets Agreement.
However, traders interpreted that as an attempt to defuse attacks from NZ First leader Winston Peters, who wants to revise the Act, rather than an attempt to spook the market.
"No one thinks he will invoke section 12," said BNZ strategist Danica Hampton.
"I'm not sure its necessarily about the currency or if he is trying to stand firm on the framework that they've got."
She said the kiwi was up again largely due to broad US dollar weakness. The euro hit a record high of US$1.3823 and sterling was at a 26-year high.
Mr Peters said there was carnage in the export sector.
"The dollar is going through the roof while inflationary pressures, particularly in the housing market, remain largely unaffected," he said.
"We cannot go on operating under the flawed ideas of an imported system which was never designed for an economy such as ours."
NZ First has drafted a bill to rewrite the Reserve Bank Act to widen the scope of its monetary function so it would have to take a broader approach to controlling inflation.
The Canterbury Manufacturers' Association (CMA) said today it expects the kiwi to maintain an upward trend towards US80c irrespective of whether the Reserve Bank raises the Official Cash Rate (OCR) next week. But it was scathing about the lack of action from the Government
"The Government's response to the current economic cycle is a case of `Nero fiddled while Rome burns'," chief executive John Walley said.
"The Government continues to use the Reserve Bank Act as a pretext to sidestep having to adjust policy settings to reduce domestic inflationary pressure."
Mr Walley said if the Government lacked the necessary leadership, then the select committee looking at alternative options for controlling monetary policy should agree on what needed to be done to break the cycle.
"How much worse do things have to get before we really start to look for a better way?"
In the market, sentiment was growing that it's just a matter of time before the kiwi hits US80c.
The US dollar selling was fuelled by worries that troubles in the US subprime mortgage sector could cast a pall over the broader US economy.
Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US79.32c US79.20c
NZ dlr/Aust dlr A90.30c A90.69c
NZ dlr/euro 0.5734 0.5747
NZ dlr/yen 96.58 96.53
NZ dlr/stg 38.59p 38.87
NZ TWI 75.75 75.81
Australian dollar US87.82c US87.37c
Euro/US dollar 1.3820 1.3786
US dollar/yen 121.79 121.88
- NZPA