KEY POINTS:
The New Zealand dollar kept up its head of steam today after a survey showed business confidence at three-year highs, ignoring a surprisingly large trade deficit.
By 5pm, the kiwi was at US70.85c, up from US70.42c late on Friday and hovering near December's levels that were the highest in more than a year.
The kiwi had a smaller gain against the Aussie, to A89.46c from Friday's A89.33c.
The currency received a boost after the National Bank of NZ monthly survey showed business confidence was at its best level in three years, with just a net 6 per cent expecting conditions to worsen over the next year.
The survey was one more piece of data likely to tempt the Reserve Bank into raising interest rates again at its next opportunity, in March.
Earlier, Statistics NZ said the country posted a worse than expected monthly trade deficit of $833 million in January, pushing the annual shortfall out to $6.03 billion.
The median forecast of economists polled by Reuters had been for a monthly deficit of $671 million, and an annual figure of $5.9 billion.
While the prospect of New Zealand's ever higher interest rates was still attractive for investors, the kiwi had overstretched and was likely to ease during the week, ANZ said.
"This will leave the market fresh and poised ready to move on the 8th of March following the RBNZ's lead."
The US dollar hit a two-month low against the euro as it came under pressure on renewed concerns about Iran's nuclear programme, and as gold and oil prices surged.
But traders also said they didn't expect a sustained dollar move based on the Iran situation alone, especially with a slew of US data this week.
Reuters currency rates:
5.05pm today 5pm Friday
NZ dlr/US dlr US70.85c US70.42c
NZ dlr/Aust dlr A89.46c A89.33c
NZ dlr/euro 0.5374 0.5366
NZ dlr/yen 85.68 85.58
NZ dlr/stg 36.10p 35.99p
NZ TWI 70.01 69.78
Australian dollar US79.22c US78.85c
Euro/US dollar 1.3191 1.3122
US dollar/yen 120.88 121.51
- NZPA