By ELLEN READ
A New Year rush of blood has pushed the New Zealand dollar past 66USc, to levels not seen since the middle of 1997.
By 5pm yesterday the kiwi was at 66.42USc.
The rise was caused by a weak US dollar and by US fund managers buying kiwi dollars, says John Body, ANZ Bank's director of foreign exchange.
Some US hedge funds had to buy New Zealand currency to re-establish positions unwound at the end of last year, he said. The local dollar had also been buoyed by global economic recovery, making investors less risk-averse, and by growing expectations of an interest rate rise when the Reserve Bank reviews the official cash rate on January 29.
"You still have the Asian central banks stopping their currencies strengthening, which is forcing more of the US dollar selling into kiwi and aussie where there's no central bank intervention," Body said.
"I guess we need to reassess our targets up towards 68-69USc now for January or at least over the first quarter. If you look at the speed of the move last year around this time, it did go up very quickly in January. It makes pretty scary reading for those people needing to buy kiwi and it looks like doing it again.
"There's nothing to stop it."
The kiwi was stable against other currencies, he said, reflecting the fact that its latest rise was confined largely to the US dollar.
At 5pm yesterday the kiwi was at 87Ac, 52.45€c, 71 and 37p.
The US dollar has been falling against many currencies and by yesterday the euro was at an all-time high of US$1.2672 and the British pound at an 11-year high of US$1.79.
The kiwi's latest rise is a continuation of last year's story, when the currency gained 25 per cent against the greenback.
While that rise grabbed the headlines, the kiwi was also strong against most other currencies over the year. The exception was the Australian dollar, against which the kiwi lost ground, falling 6 per cent from 93Ac to near 87.6Ac, thanks to a strong Australian economy, high commodity prices, the end of the drought and rising Australian interest rates.
On a trade-weighted basis - which measures the kiwi against New Zealand's five largest trading partners - the New Zealand dollar gained 11 per cent last year.
Some analysts expect the kiwi's strength to persist in the first few months of this year, calming down in the second half of the year.
Last month Bank of New Zealand chief economist Tony Alexander said the kiwi would get close to 70USc in the first half of this year.
Against the Australian dollar he expects the kiwi to edge down from present levels as Australian economic growth boosts its currency.
<i>Currency:</i> New Year spirit lifts kiwi to long-forgotten highs
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