The New Zealand dollar continued its rise and rise against both the United States and Australian dollars yesterday.
By 5pm the kiwi was at US51.75c, up from Tuesday's US51.55c close but down from its overnight high of US51.96c. The aussie was at US56.66c (US56.65c), after hitting US56.88c overnight, its highest level since July.
One dealer said the kiwi had traded in a range of US51.58/88c during the day, and was likely to remain constrained by similar levels overnight.
"We've seen a bit of buying, and we've seen selling early on. We've seen a pretty busy day," he said.
The trans-Tasman cross was at a new five-year high yesterday morning of A91.70c, but it closed in Wellington at A91.34c (A91.00c last night).
The monetary conditions index closed at +2 yesterday, entering positive territory for the first time since a brief period in May 1999, and prior to that August 1998.
Its record low of minus 1031 in September 2001 compared with a level of 600 in 1997, when the New Zealand dollar was at more than US70c.
With the MCI at zero, the economy is considered in neutral, and as it rises further into positive territory the likelihood of interest rate rises diminishes.
However the MCI, a ratio expressing a combination of the trade weighted index and 90-day bank bills, is now a little-watched indicator.
The trade weighted index, a basket of currencies for key New Zealand trading partners, closed at 58.32 (58.04 Tuesday night).
The Reserve Bank would consider the TWI neutral at 58.50.
In offshore trade, the greenback was supported against major currencies in early Asian trade after the White House reaffirmed its commitment to a strong currency, easing uncertainty over the stance of the new US treasury secretary.
Concerns about a conflict with Iraq have been mounting since the United States and Britain expressed dissatisfaction with a dossier Iraq gave to the United Nations on its weapons programme.
While most economists believe that a war with Iraq would have a negligible impact on US growth prospects, risk-wary investors feel safer avoiding US assets, especially given the possibility that a conflict with the Middle East nation could touch off attacks against US interests.
On the other key crosses at 5pm, the kiwi was buying 0.5041 euro (0.5014), 62.85 yen (62.27), 32.42 pence (32.31), and 0.7395 Swiss francs (0.7391).
The Australian dollar was at $NZ1.0947 ($NZ1.0987).
The 90-day bank bill yield was at 5.94 per cent (5.92), while on the bond market, the April 2004s were at 5.72 per cent (5.75), the November 2006s were at 5.92 per cent (6.00), the November 2011s were at 6.26 per cent (6.33), and the April 2013s were at 6.29 per cent (6.37).
- NZPA
<i>Currency:</i> Kiwi continues rise against US, Australian dollars
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