KEY POINTS:
The New Zealand dollar looks set to eclipse its post float highs against the US dollar soon, after coming within spitting distance in early trade yesterday.
The kiwi dollar broke above US74c yesterday morning for the first time in two years, hitting a high of US74.13c before easing over the session to close at US73.90c.
Westpac currency strategist Michael Gordon said the kiwi dollar was poised to surpass its previous post-float high of US74.57c set in March 2005.
"It wouldn't take a lot to do it even though it's come off a little bit today."
He didn't see US74.66c as a major hurdle for the currency.
"Most of the momentum in the New Zealand dollar seems to be coming from the declining US dollar and when the market's in the mood to sell US dollars they're not going to give much respect to something as relatively insignificant as historical levels in the kiwi."
Deutsche Bank's John Horner said that as well as US dollar weakness, other factors were looking "pretty favourable" for the kiwi dollar.
"We have a combination of healthy global growth and increasing risk appetite keeping high yielding currencies generally in favour."
In fact, the kiwi dollar's gains yesterday came after a Group of Seven countries meeting over the weekend did not produce expected warnings against carry trades.
Carry trades involve investors borrowing low interest currencies such as the yen, then putting those funds into higher yielding but possibly riskier investments, such as the kiwi dollar.
Horner said strong domestic data continued to support expectations of further rate hikes by the Reserve Bank.
"It's been trending in that direction for some time and there's little sign of any change to that at the moment. There is a risk that the rises in mortgage rates in New Zealand in recent weeks will affect data that comes out over the next couple of months, but the general background apart from that remains supportive."
