By ELLEN READ and AGENCIES
Despite the New Zealand dollar's slide from its peak last month, the rise and rise of the kiwi is not over - with levels over 71USc still expected.
The kiwi flexed its muscle yesterday, gaining more than a cent against its American counterpart in a show of strength that took it back above 69USc.
Talk of a $1 billion Uridashi issue - bonds sold to Japanese retail investors but denominated in currencies other than yen - boosted sentiment.
"There's ongoing speculation [of an Uridashi], but we'd probably expect to see more details over the next week or so," said BNZ currency strategist Sue Trinh.
At 5pm yesterday the kiwi was at 69.26USc, up from its previous close of 68.17USc.
After peaking around 71USc in mid-February, the kiwi fell back under 68USc as sentiment about the US economic recovery changed.
Citigroup economist Annette Beacher expects it to return to the 71USc level this month.
"We maintain our NZ dollar 12-month target at 71USc.
"Longer term, we forecast a peak of 73USc for the NZ dollar in 2006," Beacher said.
Deutsche Bank are forecasting a more gradual rise but still see the kiwi at 71USc by year end.
"With the United States current account deficit remaining a problem we do not see a reversal in trend for the kiwi, especially with our rates and the potential for another move on March 11," the bank's weekly commentary said.
As overseas influences continue to dominate the kiwi, a stronger euro lent a helping hand yesterday.
The euro rose against the US dollar and the yen as expectations faded that the European Central Bank (ECB) would decide to cut rates, currently 2 per cent, at its meeting later in the week.
Euro bulls were also relieved after the meeting on Friday between US President George W. Bush and German Chancellor Gerhard Schroeder did not produce any surprises.
Traders think the greenback may be at a crucial stage after its 4 per cent rebound in the past two weeks, and the currency's failure to extend those gains could be seen as the return to its two-year downtrend.
On Friday, the euro was helped by a report from a prominent research firm, Medley Global Advisers, that discounted the possibility of the ECB cutting interest rates at its meeting on Thursday.
But the euro could come under pressure if speculation for an ECB rate cut lingers after the meeting.
Another important currency market focus is US payroll data due on Friday (US time), as an improvement in the jobs market could hasten a possible tightening by the US Federal Reserve.
That would be beneficial for the US dollar, given that the currency's low interest rates - currently just 1 per cent - have been hampering global investors' buying of the greenback.
Australia's central bank meets today and will announce any rate change tomorrow. A Reuters' poll of 22 economists showed 16 think the Reserve Bank of Australia will hold steady at 5.25 per cent.
Kiwi picked to bounce higher
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