By By JIM EAGLES and AGENCIES
A bit more rocket fuel provided by central bankers sent the New Zealand dollar leaping to a new 6 1/2-year high against the US dollar yesterday.
The Kiwi - in common with most global currencies - was boosted against the greenback by comments from the European Central Bank suggesting it was comfortable with the level of US dollar weakness.
This further signal that the key central banks are not likely to try to halt the greenback's downward slide saw the Kiwi continue its New Year flight.
From its local close the previous night of 67.12USc it rose on overseas markets overnight, continued strengthening throughout the day and closed yesterday evening at 67.9USc.
The Kiwi gained 25 per cent against the greenback last year and already this year it has risen a further 3.6 per cent, making it the best performer of the 16 major currencies tracked by Bloomberg data.
It was the same story for the Australian dollar, which opened at 77.47USc - a level not seen since June 1997 - and closed at 77.36Ac.
A similar surge in the two currencies three days previously was prompted by comments from a Federal Reserve governor, Ben Bernanke, suggesting the US was in no hurry to raise interest rates from the 45-year low of 1 per cent.
This time the catalyst was European Central Bank president Jean-Claude Trichet, who left the benchmark interest rate unchanged at 2 per cent, following the example of the Bank of England, which left its key interest rate steady at 3.75 per cent.
The rate announcements from the two banks were expected and did little to move the markets, but comments by Trichet at his press conference afterwards had a sharp impact.
Trichet acknowledged that the euro's recent record-breaking rally against the dollar was hurting exports from the euro zone.
But he added that growing global demand should mitigate the impact of the rise in the zone's single currency which is making European exports more expensive.
Currency markets took Trichet's message to mean that the European Central Bank was not worried about the euro at its present level.
BNZ currency strategist Sue Trinh said the remarks "showed that he was not overly concerned with the euro's rapid appreciation thus far".
"That opened the floodgates to more US dollar selling."
National Australia Bank head of market strategy Greg McKenna said Trichet's comments had a particular impact because they were the opposite of what was expected.
"The market had expected Europeans to make some comment as regards to the euro rise last night ... Instead he gave a very sanguine outlook.
"[This] meant that the weakness that the euro showed and the Aussie showed [against the US dollar] over the previous 24 hours was reversed, and then some," McKenna said.
Trichet's comments also dealt - for the time being at least - to speculation that the transtasman currencies were ripe for a correction.
Some local dealers had wondered whether the release of weekly US unemployment data yesterday could be the pin that pricked the currency balloon.
"A good jobs number for the States could be the catalyst that really boots us off," one Wellington dealer said.
But the data, when it came, showed jobless claims were up and, anyway, had no apparent impact.
McKenna said that although at some stage there would be a reversal of the recent gains made in the Australian dollar, he expected it to keep on pushing to the 80USc mark.
"It is a case now of the trend is your friend and stick with it until it proves otherwise."
But, he added, it would be no great surprise if the upward movement started to falter late this month or early February.
"I would definitely be positioning against this rally via options at the moment. It's just a question of time frame."
Kiwi flies on European surprise
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