By ELLEN READ and REUTERS
Renewed buying interest from Europe has pushed the New Zealand dollar past 56USc to its highest level since May 1999.
Yesterday the kiwi hit 56.65USc and brokers said the strength would continue today as investors chase New Zealand's relatively high interest rates. The kiwi was at 56.58USc at the 5pm local close.
New Zealand shares are not attracting the same level of overseas interest. Yesterday, the NZSE-40 capital index closed down 32.46 points, or 1.71 per cent, at 870.56 on turnover worth $82.9 million - its lowest level since the aftermath of the September 11, 2001, terrorist attacks in the US.
John Body, director of New Zealand foreign exchange for ANZ Bank, said an expectation in Europe that the European Central Bank (ECB) would cut interest rates - now 2.75 per cent - on March 6 was behind the latest kiwi surge.
He said the rise came on very big volumes, suggesting there is genuine new buying of the local currency.
"The move came out of Europe, where a lot of discretionary capital has accumulated," Body said.
This was because people were moving out of US assets.
Twenty-three of 35 economists polled by Reuters tipped an interest rate cut next week after ECB president Wim Duisenberg said at the weekend that economic prospects had become more clouded and the latest information did not suggest a return to trend growth this year.
The Australian dollar rose above 60USc for the first time since mid-2000 and the Canadian dollar hit a three-year high above 67USc, driven by hopes that the Reserve Bank of Canada might raise interest rates next week.
New Zealand assets have been sought by investors chasing the second-highest fixed-interest yields in the developed world.
The average interest rate in G7 economies is 2.1 per cent.
The Reserve Bank's 5.75 per cent official cash rate is second only to Norway's 6 per cent.
It will be reviewed on March 6 but most economists expect no change, despite Reserve Bank Governor Alan Bollard saying last month that there "may be scope for a cut" in rates should the currency rise.
Keen European buyers push dollar past 56USc
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