By ELLEN READ markets writer
The New Zealand dollar reached a four-month high against its United States counterpart yesterday as exporters and institutions drove demand in thin holiday trade.
The kiwi rose as high as 43.1USc, its highest level since before the September 11 terrorist attacks, before settling at 42.98USc at the close of New Zealand trading.
Since the start of the holiday period on December 21, the dollar has risen 5 per cent against the yen, 4 per cent against the greenback, euro and pound and 1.5 per cent against the Australian dollar.
Although dealers are cautious about the gain - saying it is unlikely to be sustained as normal depth returns to the market - economists polled by Reuters in mid-December expected the kiwi to hit 47.45USc by year's end.
"Short-term, I think we'll consolidate around here and then pull back a bit," Bank of New Zealand currency strategist Stu Ritson said.
The dollar has hit its year peak during January in three of the last five years. But Mr Ritson said this was unlikely to happen this year as the global economy recovered.
Traditionally, he said, the currency is well supported in January by agricultural exporters - those with product to sell and those placing forward cover.
The currency market has been illiquid during the holiday period, but should gradually regain depth this week and be back to full steam by Monday.
"All these [upward] moves have happened in pretty thin markets between Christmas and New Year, so I think we'll have to wait until later in the week," one local dealer said.
"The aussie's been pretty much the same. You've got to wait until the proper market's back and working to see if they sustain these levels."
The issue of $100 million of 5-year Eurokiwi bonds last week also boosted the kiwi's fortunes.
"The move higher has been sharp and has largely been driven by fund accounts taking positions that are relatively large in comparison to liquidity in the traditional holiday period," Mr Ritson said.
Longer-term, he said, the underlying tone was positive towards commodity-based growth currencies such as the New Zealand and Australian dollars.
<i>Currency:</i> Kiwi's rise follows annual pattern
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