Bollard stymied as Kiwi dollar breaks through US70c

Reserve Bank Governor Alan Bollard admits it appears there is little he can do to rein in the New Zealand dollar.

The dollar broke through the US70c mark this morning, pushed up by offshore trading, but it's not something Dr Bollard welcomes.

He told Morning Report the current situation is undesirable and not the conditions he would like to see there for a rebalancing of the New Zealand economy.

Less than a day after the Reserve Bank governor bemoaned the New Zealand dollar's relentless rise, the kiwi raced to a new one-year high.

It peaked at US70.46c around 6am, according to Reuters data, and by 8am had slipped only slightly to US70.35c.

The ascent of the kiwi came amid improving risk appetites as world stock and commodity prices rose, and as the greenback fell to its lowest level in nearly a year against a basket of major currencies.

Announcing yesterday that the official cash rate was remaining at the record low 2.5 per cent, Dr Bollard said the sustainability of the present "patchy" recovery would be brought into question if the exchange rate were to continue its recent rise.

When his statement was released at 9am yesterday, the kiwi immediately dipped from around US69.55c to around US69.25c but recovered within 15 minutes.

During the day yesterday the kiwi was unable to get to US70c and by 10pm had fallen back to US69.25c, but after that raced upwards.

ANZ bank said the NZ dollar was an out-performer overnight, despite Dr Bollard's concerns, which ANZ also held, about the sustainability of any recovery and the need for the economy to rebalance.

The kiwi looked like it had the momentum to push higher, after a potential pullback today, ANZ said.

"At present, markets are ignoring NZ's domestic economic fundamentals and trading is driven more by risk appetites and hopes of reflation.

"Something will have to give eventually. But knowing when and what the catalyst will be is incredibly difficult."

The NZ dollar was also up to A81.46c against the Australian dollar at 8am from A81.11c at 5pm yesterday. It rose to 0.4823 euro from 0.4786, and to 64.50 yen from 64.12. The trade weighted index was 64.24 at 8am from 63.82 at 5pm.

- NZPA