The New Zealand dollar flexed its muscles yesterday, bounding above 42USc for the first time since mid-September and gaining against virtually every other currency in the process.
At the 5 pm close the kiwi stood at 42.10USc, up from 41.59USc at its Friday close, and last night it was around the 42.30USc level.
It also strengthened half a cent against the Australian dollar.
The trade-weighted index jumped to over 49, up from 48.51 at Friday's close, and is at its highest since mid-September.
Dealers said the currency was strong for no particular reason other than the weakness in the greenback, which is showing signs of coming down to earth as once unstoppable US economic growth at last appears to be slowing .
Languishing at record lows below 40USc only two weeks ago, the kiwi surged through 41USc on Friday, following the lead of not just the Australian dollar, but also the euro, which has recovered even more ground, having taken on new status as a refuge as the greenback weakens.
Even against a rejuvenated Australian dollar, the kiwi made gains yesterday, rising to over 78.05Ac, the highest it has been since August 10.
One dealer, who did not wish to be named, said the kiwi's recent good form appeared to be driven by US dollar weakness rather than anything else."It's been a pretty good last few days for the aussie, the kiwi and the euro," he said.
But while the kiwi's recovery may be a fillip to national pride, any significant gains could see exporters facing a triple whammy of slower world growth and weaker commodity prices at the same time as the dollar strengthens.
In Australia, analysts are warning that there is no spectacular recovery on the horizon, despite the currency's hitting a two-month high of 54USc yesterday, a level not seen since October 4.
ABN AMRO stategist Peter Clay said that while it was tempting to conclude that the currency would now enjoy a recovery, the momentum on the downside had also waned in November and had then been followed by further falls.
"There's a bear in there," he said.
RBC Dominion Securities senior economist Su-Lin Ong was cautious about predicting too much upside for the currency, although she said a base around 52USc cents looked to be forming.
"A softer US dollar is a double-edged sword for the Australian dollar," she said.
"While it may assist the Aust/US cross as the overvalued US dollar corrects, it also highlights the prospects of more moderate global growth as the world's key engine shifts down a gear."
- Herald staff, NZPA
<i>Currency:</i> Kiwi moves to front of pecking order
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