The trade-weighted index of the New Zealand dollar rose above 78 for the first time since it was floated in 1985 and the kiwi soared against the yen as Japan followed the US in flooding its currency market.
The TWI rose to 78.14 from 77.72 at 5pm in Wellington yesterday. The kiwi gained to 84.06 yen from 82.98 yen and rose to 84.57 US cents from 84.20 cents.
The Bank of Japan yesterday offered to buy 1 trillion yen of bonds maturing in 5-10 years and 200 billion yen of bonds maturing in more than 10 years in the first action since last week doubling monthly purchases to 7.5 trillion yen (US$80 billion), equivalent to 1 per cent of gross domestic product. The yen fell to its lowest against the greenback in almost four years.
"The reality is that Japan is doing something special, so the impact on the TWI has got to continue to be positive on that," said Alex Sinton, senior dealer at ANZ New Zealand. While the yen is approaching levels that would be attractive for Japanese exporters, any buying by them is unlikely to stem the slide, he said.
Traders are awaiting a speech from Federal Reserve Chairman Ben Bernanke, who is scheduled to speak in Atlanta at the 2013 Financial Markets Conference at what will be mid-morning in Wellington.
Sinton said with signs the US economy is exhibiting its pattern of a spring slowdown, Bernanke isn't likely to give any hints that quantitative easing - US$85 billion of bond purchases a month - will end any time soon. Payrolls data last Friday in the US showed the world's biggest economy added less than half the jobs in March that were forecast by economists.
The kiwi and the Australian dollar will probably extend their gains, Sinton said.
"Anyone searching for yield and happy to pick up the currency gain would not look past the kiwi or the Aussie," he said.
The New Zealand dollar rose to 65.04 euro cents from 64.83 cents and gained to 55.47 British pence from 54.93 pence. It edged up to 81.23 Australian cents from 81.19 cents.