The dollar yesterday reached 72.80USc, its highest level since the currency was floated at 44.4USc on March 4, 1985.
Pushed up by investors seeking to capitalise on New Zealand's world-leading interest rates - and predictions they could move even higher - the kiwi passed its June 1998 post-float high of
72.75USc before settling back to 72.37USc at 5pm yesterday.
The ANZ Bank said a weak US dollar helped boost the kiwi's strength, but local factors such as high yield, low unemployment, fiscal surplus and strong economic growth were also important.
Opinions are split on where the currency will go. ANZ believes it will reach 75USc, saying that while from a macroeconomic perspective it has done its dash, it "remains sympathetic to one last hurrah".
But Westpac's senior currency strategist, Johnathan Bayley, says it is unlikely to go much further "with the US dollar fairly directionless, and Australian dollar positioning heavy and tired".
He said a move above 73USc would depend on whether a new round of greenback weakness came before or after an inevitable clearance of long Aussie dollar positions.
Foreign demand for kiwi-denominated bonds remained an important driver for the currency.
The maturity profile of dollar eurobonds on issue showed the kiwi faced a steady increase in bond redemptions over the next two years.
"Combined, the probable decline in issuance and the scheduled increase in redemptions indicate eurobond activity will shift from being a significant source of kiwi demand to a significant source of kiwi supply through 2005/2006," Bayley said.
He acknowledges this is more of a medium/long-term driver for the kiwi. But he says it is worth considering how much it will accelerate the kiwi's decline if the currency starts to see sustained weakness later in the year.
The kiwi is 16c, or 27 per cent, above its post float average and 33c above its low point, reached in October 2000.
