The New Zealand dollar flew ever higher towards the coveted US50c mark yesterday, powering to levels not seen in 25 months.
The kiwi touched US49.16c before softening to US49.08c at 5pm, nearly half a cent from its opening level.
The speed of its ascent caught brokers and even Finance Minister Michael Cullen by surprise.
"It was a really busy morning, actually," said Bank of New Zealand currency strategist Stu Ritson.
"The move higher accelerated yet again, unbelievably. Essentially I think most of the demand was coming from offshore but it saw the kiwi spike to above 49c in the morning's trade and not pull back very far."
The kiwi's rise appears to be a combination of New Zealand's attractive yield differential and a weakening US dollar, which had been compounded by a selloff on Wall Street on Monday night.
"It just seems a lot of the natural suppliers and importers have pulled away from the market a little bit, so we're seeing quite aggressive spikes higher, with not a great deal of selling," said Mr Ritson.
Mr Cullen told journalists yesterday that while the kiwi dollar's rise had been rapid, so had the fall of the US dollar, which he felt was more of a correction.
He said he would be concerned for the manufacturing sector if the New Zealand dollar rose above A85 cents, apparently unaware that that level had been breached.
"If it pushed up towards A90 cents, then the exporters would be worried. They would be in danger of getting a double whammy," he said.
Dealers say there is now very little standing in the way of the kiwi's move to US50c within the next month.
Mr Ritson said it could happen as soon as the latter part of this week. Overnight he was expecting a range of US48.80/49.20c .
Against other currencies, the kiwi also hit fresh records yesterday including a 39-month high of A85.25c against the Australian dollar, 33-month highs of 33.53p against sterling and 60.61 against the yen and a one-year high of 52.07 against the euro.
The aussie dollar mirrored the kiwi, rising half a cent to US57.60c, partly on hawkish comments by RBA governor Ian Macfarlane and expectations of an interest rate rise tomorrow.
It was buying $NZ1.1751 (compared with $NZ1.1823 on Friday) while the kiwi was buying A85.20c (A84.57c), 60.61 yen (59.20), 33.53 pence (32.75), 0.7644 Swiss francs (0.7487) and 0.5207 euros (0.5112).
As a result of the kiwi's strength, the trade weighted basket was at its highest for 33 months. At 56.69, the TWI is up 12.7 per cent for the year.
In the money market, the 90-day bank bills rose sharply - up at 5.95 per cent compared with 5.86 per cent on Friday. Together with the strong TWI, that helped push the MCI down to minus 142 from minus 240 - its tightest for over two years.
The April 2004 bonds were at 6.14 per cent (6.11 on Friday), the November 2006 bonds at 6.62 per cent (6.59), and the November 2001 bonds at 6.75 per cent (6.74).
- NZPA
<i>Currency:</i> Kiwi flies ever higher towards coveted US50c
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