KEY POINTS:
The New Zealand dollar soared more than half a US cent to a fresh 22-year post-float high today, after strong inflation data raised the odds of an interest rate hike this month.
The kiwi rose from US78.59 to briefly above US79c, following second quarter consumer price inflation data up 1 per cent on the previous quarter, ahead of market expectations of 0.8 per cent.
The New Zealand dollar closed at 78.81c, well above its US78.21c close on Friday.
Economists are now putting high odds on another 25 basis point interest rate hike when the Reserve Bank meets on July 26.
If so, it would be the fourth rate rise this year. New Zealand's official cash rate is already the highest in the industrial world at 8 per cent.
Traders said the data had set the scene for the New Zealand dollar to broach the US80c mark.
"The data over the last few days -- CPI today, strong retail sales on Friday, QSBO (quarterly survey of business opinion) was pretty solid overall last week -- it's greatly increased the chance of an RB rate hike," Michael Gordon, Westpac's currency strategist, said.
"There's clearly a lot of inflationary pressure out there."
Westpac is expecting another hike in September and Mr Gordon expected further buying in the Kiwi dollar when Japan returned to the market from a public holiday tomorrow.
Adding fuel to the kiwi's fire was the US economic picture, which Mr Gordon said was "still not that encouraging".
The kiwi also soared against our other major trading partners, including the Australian dollar at A90.36c (compared with A90.34c on Friday).
It was buying 0.5715 euro (0.5675), 38.70 pence (38.56p), and 96.05 yen (96.78).
The trade weighted index was at 75.47 this morning from 75.08 on Friday evening.
Reuters currency rates:
5pm today 5pm Friday
NZ dlr/US dlr US78.81c US78.21c
NZ dlr/Aust dlr A90.36c A90.24c
NZ dlr/euro 0.5715 0.5675
NZ dlr/yen 96.05 95.78
NZ dlr/stg 38.70p 38.56p
NZ TWI 75.47 75.08
Australian dollar US87.24c US86.66c
Euro/US dollar 1.3790 1.3781
US dollar/yen 121.84 122.44
- NZPA