By ELLEN READ markets writer
The New Zealand dollar powered up to 49USc yesterday intent on reaching 50USc as attractive interest rate differentials and a strong domestic economy continue to attract investors.
Thin trade because of the Queen's Birthday holiday in New Zealand and the Queen's jubilee holiday in Britain exaggerated the kiwi's strength and helped push the dollar speedily on as it continues to benefit from a weak US dollar.
Bank of New Zealand currency strategist Stuart Ritson said the "relentless nature" was shown by New Zealand dollar's increasing in value for 18 of the past 20 sessions.
"That statistic has not been seen in recent times, if ever in the dollar's post-float history," he said.
The kiwi has now appreciated almost 17 per cent this year against the US dollar, the second strongest performance of the primary currencies.
The kiwi also posted fresh highs against other currencies yesterday, including a 39-month high of 85.25Ac, 33-month highs of 33.53 pence and 60.61, and a one-year high of 52.07€c.
The rise of the New Zealand dollar during the past month has had a significant effect on prices for key export commodities in world markets, the ANZ bank said.
The ANZ World Commodity Price Index fell 1.7 per cent last month to be down 12 per cent on the same time last year, but the New Zealand Dollar Index tumbled 5.2 per cent to be down 19.3 per cent on the previous May level.
The index averages exchange rates prevailing during May, but the ANZ said the kiwi's present exchange rate levels would have produced a more severe effect.
"This demonstrates the profound impact that the surging [New Zealand] dollar could potentially have on New Zealand export returns," ANZ chief economist David Drage said.
Lingering weakness in international dairy prices and world meat prices edging off their recent highs were key contributors to the 1.7 per cent fall in world prices.
Partly offsetting these falls were gains in world prices for logs, timber, kiwifruit, wool and skins.
However kiwi currency strength led 14 out of the 17 commodities to record lower prices in New Zealand terms.
Drage said while further weakness in world prices could not be discounted, there appeared to be sufficient support to expect the world index to start to stabilise.
"[But] even if commodity prices overall in world markets are stabilising, further currency strength, which looks likely given its recent momentum, could send the New Zealand dollar index even lower over the months ahead," he said.
"Further weakness in New Zealand dollar commodity prices is a major downside risk to export returns and the economic outlook generally," Drage said.
Kiwi roars to highs worldwide
AdvertisementAdvertise with NZME.