By ELLEN READ and AGENCIES
The New Zealand dollar has hit its highest level this year, propelled by a dramatic dip in the US dollar.
As the greenback slumped against most global currencies, the kiwi rose to 71.02USc, its highest level for eight years.
ANZ foreign exchange head John Body said the market had been pushing the US dollar to weaker levels, testing the reaction from global officials.
While some European officials have come out this week against the greenback's weakness, comments overnight from US Treasury Secretary John Snow undermined that opposition, giving the market the green light to sell the greenback down further.
Snow reassured critics on Wednesday that the US was dealing with its huge budget and trade deficits, but discounted any suggestions of official intervention to prop up the ailing currency.
Even as the greenback hit an all-time low against the euro, Snow repeated the US position: the Administration is committed to a strong dollar and looks to the market to set its value. "We believe in open, competitive currency markets," he told the Royal Institute of International Affairs in London.
"We think the world functions best with free trade and free capital flows. Nobody has ever devalued their way to prosperity."
With the kiwi closing in on its post-float high of 72.75USc hit in June 1988, Body believes it could hit 73USc before Christmas on a combination of support for the high-yielding kiwi and negative US dollar sentiment.
This would not please exporters and, with this country about to enter a period of strong seasonal exporter demand for the kiwi dollar, unless US dollar sentiment improved the rise of the local currency would be exacerbated, Bancorp Treasury Services said in a daily report.
The US dollar plunged to an all-time low against the euro ahead of the G20 finance ministers' meeting in Berlin, as analysts fretted officials would do little to stem the greenback's fall.
European leaders have urged the US to reduce its widening budget deficit to stop the slide, which plumbed new depths yesterday with the euro reaching US$1.3047.
Snow, who will attend the G20 meeting, acknowledged the US had to promote greater savings to reduce its current account deficit but added that it was a "shared responsibility".
He said more flexible currencies in Asia and reforms by other countries to foster stronger growth were also needed to shrink the deficit, which is running at close to 6 per cent of gross domestic product.
US policy had made restoring growth a priority.
"We know the deficit is too large, we know it has to come down, it's now in the process of coming down as we get our economy growing," he said.
Kiwi hits eight-year high against struggling greenback
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