By ELLEN READ
The New Zealand dollar topped 91Ac yesterday, levels not seen since early last year.
After reaching 91.04Ac the kiwi settled back to close at 90.85Ac.
The strength was continued reaction to Thursday's Reserve Bank announcement of a rise in the Official Cash Rate to 5.75 per cent from 5.5 per cent.
While the increase was widely expected, bank governor Alan Bollard signalled there could be two further rate hikes before year's end.
"There is some risk that markets may look at interest rate differentials and decide to put capital flows into into New Zealand. We don't particularly expect that to happen, but there is a risk," Bollard told Parliament's finance and expenditure committee on Thursday.
"We have had a relatively high rate against the Australian dollar over the past month. I suspect that is the market's interpreting probably temporary soft data out of Australia."
He said he didn't expect much exchange rate impact from the cash rate hike and from warnings of more to come as it is the United States economy that is the main driver of currency rates.
Bollard said conditions were "miles and miles away" from those where the central bank would intervene directly in the market.
Manufacturers are less than impressed by the move up against the Aussie.
"It's not good news but it's not unexpected given that the Reserve Bank put interest rates up," Alasdair Thompson of the Employers and Manufacturers Association said.
"Australia is our largest export market and the one exporters go to first when they're starting out, so this is serious."
Rate rise helps kiwi over 91Ac
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