The New Zealand dollar pressed on to reach another post-float high on its Trade Weighted Index yesterday, due mostly to ongoing weakness in the yen as the Bank of Japan stepped up its attempts to reinflate the economy.
At US85.37c, the kiwi was back at levels not seen since early February this year.
Currency strategists were bullish about the local currency's prospects, and some said a break of its post float high of US88.4c - set in August 2011 - is a possibility before the year's end.
The Trade-Weighted Index hit 78.67 - its highest point since the currency floated in 1985.
The index has been breaking records on an almost daily basis since Bank of Japan Governor Haruhiko Kuroda last week announced plans to double monthly bond purchases to about 7.5 trillion ($88 billion).
The kiwi also hit a five-year high of 82.68.
The Bank of New Zealand said the New Zealand dollar was the strongest performing G10 currency in the first quarter of 2013.
Early this year, the BNZ said it expected the currency to trend higher throughout this year. "This view remains intact. If fact, we are now even more bullish," it said.
"Our year end NZD/USD forecast was lifted to 0.85, and we noted a spurt up to 0.90 could no longer be ruled out," the bank said.
While the global backdrop is expected to be slightly less supportive in future, the strength of the domestic economy, rising terms of trade, and a favourable interest rate differential should pick up the slack, the bank said.
Dealers said the strength of the kiwi and big gains in real estate puts the Reserve Bank in a conundrum - does it cut its official cash rate to take the steam out of the currency market, or does it start raising rates to try and choke off a house price bubble?
Early this week, Deputy Governor Grant Spencer said in a speech that the bank's flat outlook for interest rates would need to be revisited if rising house prices, and the associated expansion of credit, began to spill over into excessive consumer spending and inflationary pressure.
- additional reporting BusinessDesk