KEY POINTS:
The New Zealand dollar rounded off the year on one-year highs against the yen and greenback.
Yen and euro support helped the kiwi dollar to a close of US70.62c, well up on yesterday's close of US70.25c and equal to the year's peak reached during yesterday's session.
Speculation that the Bank of Japan may not raise interest rates in the New Year pushed the kiwi to a one year high versus the yen, closing at 84.02 yen.
The Australian dollar also struck a fresh 9 1/2 year high.
"We've definitely seen a lot of retail demand for kiwi and aussie out of Japan over the last month, and that's been related to [a] newly established investment trust and other things," BNZ currency strategist Danica Hampton said.
"That will be dented if we do see the Bank of Japan hike rates early 2007 but as for when and where they're actually going, things are a little bit mixed for the next day or two."
Demand for high yielding currencies has seen the New Zealand dollar rise 3.6 per cent over the year.
It troughed at US59.68c during the year, a fall of 13 per cent from the start of the year, and has bounced back 8.5 per cent since then.
Ms Hampton said the kiwi faced resistance around US70.70c tonight but could, if it broke through, squeeze higher to US71.20c.
She believes the kiwi is being underpinned by speculation of a New Zealand interest rate rise in January, but bond spreads were weaker, indicating that the rally could unwind in the longer term.
The kiwi strengthened slightly against most of its other trading partners but weakened against the Australian dollar to US89.16c from A89.40c yesterday.
Local markets will be closed on Monday and Tuesday next week for New Year holidays. Trading will resume on Wednesday.
Overseas, the US dollar steadied on Friday after paring losses against the euro on a raft of data that showed the US economy may be in better shape than earlier thought.
Stronger-than-expected monthly readings for existing homes sales, consumer confidence, and the Chicago manufacturing index helped offset continual market expectations that the US will cut interest rates next year.
On Thursday a member of the European Central Bank governing council added fuel to the fire by saying euro zone rates were low in historical terms, highlighting the risk that the greenback's rate advantage could narrow further.
Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US70.62c US70.25c
NZ dlr/Aust dlr A89.16c A89.40c
NZ dlr/euro 0.5361 0.5356
NZ dlr/yen 84.02 83.46
NZ dlr/stg 35.94p 35.90p
NZ TWI 69.61 69.41
Australian dollar US79.12c US78.59c
Euro/US dollar 1.3155 1.3118
US dollar/yen 119.00 118.78
- NZPA