A rampant New Zealand dollar raced to a 21-month high against the United States dollar yesterday and a four-year high against the Australian dollar.
It hit a peak of US50.45c overnight and closed at US50.27c compared with Thursday's close of US49.85c.
That was despite a rising greenback which retained a bullish tone in Asian trade, supported by a strong rally on Wall Street and better than expected US manufacturing data.
Against the Australian dollar, the kiwi flew to a high of A89.90c compared with Thursday's A89.03c close and eased back to A89.37c at the close.
It was last up at this level in December 1998 but is still well shy of its all-time high of A95c touched in July 1995.
Exporters complained they are starting to feel the effects of the currency's strength but foreign exchange dealers said more pain will come.
"I can't see any change" ANZ Investment Bank chief dealer in New Zealand Murray Hindley said. "It's broken key levels. I think it will go higher."
Westpac chief dealer in New Zealand Basil Payn said the kiwi now had a good base at US50.20c and a push above US51c was likely.
He said the charts were calling for a test of US51c in the next week or so.
The kiwi is being boosted by New Zealand's comparatively high real interest rates and this week's tougher-than-expected Reserve Bank Monetary Policy Statement.
Markets had expected the Reserve Bank to signal some easing next year and the lack of a signal was a sign to foreign exchange markets to buy the kiwi.
"It's reinforced the interest rate differential and that our monetary policy is significantly tighter than most other countries in the world," Mr Payn said.
Because equity markets were so uncertain, offshore investors found New Zealand's interest rates highly attractive.
"A lot of them can't believe our interest rates -- it's just too good to be true," he said.
He said the Australian dollar was not doing as well because of the drought there and its high trade deficit. The terrorism threat was not a factor, he believed.
The New Zealand dollar has gained a massive 21 per cent against the US dollar this year and 10 per cent against the Australian dollar.
The New Zealand dollar trade weighted index, which measures the currency against those of New Zealand's five main trading partners, was at a 2-1/2 year high of 57.31 compared with its 56.76 closing level on Thursday. It closed at 57.18.
The monetary conditions index has tightened dramatically recently, hitting minus 85 during the day, last seen in May 2000. It closed yesterday at minus 102 (minus 139 on Thursday).
The 90-day bank bill yield was little changed at 5.89 per cent, compared with 5.91 per cent at Thursday's close.
The kiwi was up against all currencies -- rising to 0.5012 euro (0.4982 on Thursday), 61.71 yen (60.99), 31.77 pence (31.70), and 0.7367 Swiss francs (0.7315).
The Australian dollar was buying just $1.1192 ($1.1229).
The bond market had a mixed session yesterday. The April 2004s were at 5.73 per cent (5.72), the November 2006s were at 6.01 per cent (5.99), the November 2011s were at 6.36 per cent (6.28), and the April 2013s were at 6.40 per cent (6.33).
- NZPA
<i>Currency:</i> Kiwi sprints to higher levels against US, Aust dollar
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