Dimming chances of an interest rate hike in the US have worked to counteract any weakness in the New Zealand dollar, handing the primary sector another hurdle to clear as it struggles with weaker dairy and sheep meat prices.
The kiwi yesterday hit US69.65c - its highest point since June last year, having gone through a gaping 10 per cent range in just the last two months.
Any weakness brought on by the Reserve Bank's surprise 25 basis point rate cut to 2.25 per cent on March 10, which initially drove the currency down to US66.20c, has now been well and truly extinguished.
ANZ senior foreign exchange strategist Sam Tuck said it appeared the US Federal Reserve, despite fairly strong domestic data but with an eye on the delicate state of the world economy, had adopted a "dovish" approach to rate hikes.
This had weakened the US dollar and handed more strength to currencies like the New Zealand and Australian dollars, which offer modest but superior rates of interest compared with many other countries.
"The prospects of rate normalisation have dimmed, so it's going to take longer for the Kiwi's yield advantage to decline," Tuck said.
BNZ currency strategist Jason Wong said that despite all four of the Reserve Bank's latest cuts, going back to last July, the currency's Trade Weighted Index has rallied by 4 per cent.
"There is bigger stuff going on which is negating the Reserve Bank's cuts," Wong said. "The Reserve Bank is not getting much bang for its buck via the currency transmission."
"The key thing is the global backdrop here," he said.
There is bigger stuff going on which is negating the Reserve Bank's cuts.
The central bank has long complained that the local currency has stayed too high given the poor state of the commodities markets - particularly dairy - which many had expected to pick up next season.
"For exporters, the run back up to US69c and to 73.3 on the TWI is proving eye watering," ANZ agri economist Con Williams said.
"For dairying, the sector under the most pressure at present, the run back up is especially painful as a lower NZ dollar is a key reason that a better income outlook in 2016/17 has been flagged," Williams said.
"If this doesn't prove to be the case there will be serious industry concern," he said.