By ELLEN READ and REUTERS
After teasing for several weeks, the New Zealand dollar yesterday broke convincingly through the 50USc level.
The kiwi hit a 21-month high of 50.45USc early yesterday in overseas trade.
Dealers said the peak was reached on renewed enthusiasm for high-yielding peripheral currencies.
Some were sceptical about the jump's sustainability, saying there were plenty of profit takers and importers willing to sell at current levels.
Westpac chief dealer in New Zealand Basil Payn differed, saying the kiwi now had a good base at 50.2USc and a push above 51USc was likely.
"Some charts are calling for a test of 51USc, so we may see that at some point in the next week or so."
He said the kiwi was boosted by New Zealand's comparatively high real interest rates and this week's tougher-than-expected Reserve Bank monetary policy statement.
"That certainly added a bid tone to the market where people had been expecting something more on the dovish side than they got.
"It's reinforced the interest rate differential and that our monetary policy is significantly tighter than most other countries in the world."
Because equity markets were so uncertain, overseas investors found New Zealand's interest rates highly attractive, he said.
The kiwi, which has led a steady rally in commodity currencies in the past four months, also rose to its highest level in almost five years against the Australian dollar at 89.56Ac.
"We are continuing to see demand for kiwi from fund managers looking for diversification, yield and relative safety," said Tony Beard, head of international funds at National Australia Bank.
The New Zealand and Australian currencies were shunned in the wake of the September 11 attacks last year as global growth prospects darkened and investors moved into the safest, most liquid assets.
But both have rallied sharply this year as evidence of strong domestic growth and recovering appetite for risks have encourage investors back into higher-yielding currencies.
The kiwi has gained over 20 per cent against the US dollar and about 10 per cent against the Aussie so far this year. At 5pm yesterday the kiwi was worth 50.25USc and 89.3Ac.
Kiwi breaks 50USc in 21-month high
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