KEY POINTS:
The New Zealand dollar trade-weighted index hit a post-float high today, giving the lie to suggestions the kiwi dollar's rise has mainly been a function of US dollar weakness.
While the kiwi also hit a new post-float high against the greenback yesterday and today closed just short of that mark on US76.39c, it was also at a 20-year high against the yen and trading above 90 Australian cents.
The kiwi is riding a global wave of demand for high yielding currencies.
The Reserve Bank today confirmed the NZ dollar's trade weighted index (TWI) hit a record overnight, with Reuters data putting the peak at 74.62. The previous peak was hit in December 2005.
The TWI measures the NZ dollar against a basket of this country's major trading partners. The currencies in the basket are the US dollar, euro, yen, Australian dollar and sterling.
The index has risen 18 per cent in a year. Such a rise would exceed or equal many exporters' profit margins.
The kiwi's muscular performance brings into question the Reserve Bank's intent when it intervened in the market earlier this month.
The central bank confirmed one intervention, its first since the NZ currency was floated in 1985, and is widely thought to have intervened a second time.
Demand by carry traders -- who borrow in low yielding zones such as Japan and invest for high yield in places like New Zealand -- remains unsated.
"We're seeing the (US) dollar gain against low yielders like the yen, but this is not really a (US) dollar story -- it's about strong global growth and demand for high-yielding commodity currencies," said Adnan Akant, head of foreign exchange in New York at money manager Fischer Francis Trees & Watts.
The biggest winners have been the New Zealand and Australian dollars, benefiting as strong global economic growth has driven demand for the commodity exports of both countries, putting upward pressure on their interest rates.
The kiwi peaked against the greenback around 6.30pm yesterday at US76.58c, according to Reuters data, as investors flock to the highest interest rates in the industrialised world, of 8 per cent.
While both antipodean currencies were strong, the NZ dollar looked to have pipped its trans-Tasman counterpart, peaking against the aussie at A90.54c, then easing to A90.28c at the local market's close.
The kiwi has been above A90c only a few times since February 2006.
Against the yen, the NZ dollar just keeps rising, closing near its 20 year peak at 94.71 yen, up from 94.41 at the same time yesterday.
The kiwi has put in a stellar performance against the Japanese currency in recent months, having risen from below 89 yen at the end of May and below 79 yen early in March.
Against the euro, the kiwi broke above 0.5701.
In the major currencies, the yen continued to fall, hitting a 4-1/2-year low against the US dollar as Japanese investors dumped their low-yielding currency,
The Australian dollar struck a 16-year peak against the yen and sterling hit a 15-year high.
The US dollar held broad gains made after a survey of US Philadelphia-area factory activity posted the strongest growth since April 2005, reinforcing expectations the Federal Reserve will keep interest rates on hold at 5.25 per cent.
Reuters currency rates:
4.30pm today 4.30pm yesterday
NZ dlr/US dlr US76.39c US76.38c
NZ dlr/Aust dlr A90.28c A90.33c
NZ dlr/euro 0.5701 0.5697
NZ dlr/yen 94.71 94.41
NZ dlr/stg 38.36p 38.32p
NZ TWI 74.48 74.37
Australian dollar US84.65c US84.48c
Euro/US dollar 1.3391 1.3396
US dollar/yen 123.89 123.65
- NZPA