By ELLEN READ and REUTERS
The New Zealand dollar passed 87Ac to reach near-four-year highs against its Australian cousin this week as rising local interest rates enhance the kiwi's popularity.
The kiwi has gained 7.7 per cent against the aussie this year.
Yesterday, it reached 87.53Ac, but slipped back to 86.85Ac at 5pm.
The Reserve Bank of New Zealand this week lifted the official cash rate by 25 basis points to 5.75 per cent.
But Australia's central bank decided against a third successive monthly rise, leaving its cash rate at 4.75 per cent.
This leaves the Australian rate a percentage point below New Zealand's, and the margin is largely responsibly for the kiwi's ascendancy.
The ANZ Bank said the divergence in the Australian and New Zealand central bank actions provided the impetus for the kiwi to push up against the Aussie.
Bank of New Zealand currency strategist Stu Ritson said the exchange rate could go as high as 90Ac in coming months.
The kiwi closed the week against the US dollar at 48.35USc, down 0.23USc from Monday.
A Reuters poll of 10 research houses suggests it could climb above 51USc by the end of the year and to around 53USc by next June.
Its continuing recovery from below 40USc last September has been driven by a weakening US dollar, strong domestic economic fundamentals and a high interest rate differential between New Zealand and other countries.
"The overriding driving force will be the global weakening of the US dollar, which hasn't finished," Deutsche Bank chief economist Ulf Schoefisch said.
Most of the kiwi's gains against a broadly weaker greenback were made between late February and late June, when it rose around 8USc or 19 per cent to peak just above 50USc, before consolidating below 49USc.
But relatively high interest rates are also playing a part.
"We were first out of the blocks on the tightening cycle, so it's very attractive to put money here at the moment relative to other countries," Schoefisch said.
Rates rise boosts dollar
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