The New Zealand dollar sprinted to a five-month high against the US dollar of US64.65c today.
In choppy trading it rose overnight, fell back again and then rose sharply after stronger than expected building data.
By 5pm, it was buying US64.57c compared with US63.97c at 5pm yesterday.
Its gains against the aussie dollar were even more impressive, where it rose almost a cent to A84.72c from A83.87c yesterday.
It also rose against other currencies and the trade-weighted index finished at a four month high of 64.48 compared with 63.85.
BNZ currency strategist Danica Hampton said the market had become carried away and the kiwi was over-cooked.
However, she said the kiwi had a head of steam and despite her bank's bearish medium-term outlook for the currency, she expects a thrust higher.
A break of resistance at US64.75c would quickly see it rise to US65.20, she said.
A host of investment banks were trading the kiwi on the basis of momentum and computer models, she said.
She said buying kiwi against the aussie was bizarre given the Australian dollar's good fundamentals.
The ending of the tightening cycle in the US had put high yielding currencies back in vogue. That had coincided with a scaling back of easing expectations by the Reserve Bank.
Ms Hampton said most of the local data had not been much stronger than forecast by the Reserve Bank. Crunch time for the kiwi could be on September 14 at the Reserve Bank's next review of monetary conditions and interest rates.
Westpac economists agreed. They said New Zealand dollar bulls had another two weeks to take the currency higher, "but after that, the reality of a slowing economy and a huge external deficit will start to impose itself once more".
They noted the kiwi tended to rise in the absence of major data releases, reflecting yield-driven demand.
"With no major data due in the near term, the currency is free to continue its recent gains.
"But data in the second half of September will highlight the poor fundamentals of the NZ economy."
ANZ economists said the release of minutes from the US Federal Reserve's August 8 policy meeting had ensured support for the kiwi.
The US dollar fell against the euro and yen following the release of the minutes which did not reflect any urgency on the part of the US central bank to raise interest rates to contain inflation pressures.
"The minutes do not look like a dollar selling factor in the medium-term," said Kosuke Hanao, head of forex sales at HSBC in Tokyo.
"I think the market is now shifting its focus to the US payrolls report on Friday."
Economic data in the past month has indicated that US growth is slowing and inflation pressures are receding, weighing on the US dollar as expectations are reinforced that the Fed won't lift rates further at its next meeting in September and possibly beyond.
Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US64.57c US63.97c
NZ dlr/Aust dlr A84.72c A83.87c
NZ dlr/euro 0.5032 0.4988
NZ dlr/yen 75.42 74.67
NZ dlr/stg 34.01p 33.68p
NZ TWI 64.48 63.85
Australian dollar US76.24c US76.23c
Euro/US dollar 1.2834 US1.2823
US dollar/yen 116.78 116.76
- NZPA
<i>Currency:</i> NZ dollar sprints to five-month high
AdvertisementAdvertise with NZME.