By ELLEN READ
The New Zealand dollar broke above 63USc this week for the first time since November 1997.
Buoyed by ongoing weakness in the United States dollar, improved local growth prospects, favourable interest rate differentials and a stronger Australian currency, the kiwi hit 63.15USc in Thursday night trade.
At 5pm yesterday, the dollar stood at 63.07USc.
Lacklustre US jobs and trade data, along with concerns about the Iraq situation, have weighed on the greenback, while the aussie is in favour because of a positive economic outlook and an interest rate rise.
Higher commodity prices are also helping to push the kiwi up.
"As global growth picks up, there is a pick-up in demand for commodities such as metals, oil, meat and dairy. And as a result prices increase," said ASB Bank economist Kate Skinner.
"The currencies of countries that export commodities therefore tend to appreciate as the global economy recovers."
The kiwi has gained more than 1.5USc this week alone and is up almost 11USc, or 21 per cent, from early January levels of about 52USc.
Since the kiwi floated in 1985, the peak is 71.7USc, hit in November 1996.
Bank of New Zealand chief economist Tony Alexander said the kiwi was likely to appreciate further over the next six months, toward 64USc, on the back of further greenback weakness, a firmer Australian dollar lifted by strong economic growth and tightening monetary policy, and rising export commodity prices (which were already up 10 per cent from a year ago).
After that, he saw the kiwi edging lower from the middle of next year because of an expected worsening current account deficit, relative economic underperformance and rising US short-term interest rates.
Exporters have been hit by the rising currency but, as Alexander pointed out in his weekly commentary, nowhere near as hard as they were in the 1990s.
"There is no output-sapping drought, no Asian Crisis is occurring, and interest rates are low, so getting through a period of lowered receipts is not too difficult for most," he said.
A booming domestic economy also meant exporters could redirect some products to the home market.
<i>Currency:</i> Kiwi breaks 63USc mark after six years
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