KEY POINTS:
"Eighty cents here we come," said currency traders today as the kiwi dollar hit a new post float high of US79.43.
"The whole market wants a crack at 80 cents," said a Wellington dealer.
"I personally think we have to go higher, particularly with the weak US dollar.
It look likes US80c is pretty possible to be perfectly honest."
Local and global factors were conspiring to push the kiwi higher although if it hits US80c, traders will wary of renewed Reserve Bank intervention.
One local bank was advising clients to buy at US79.1c and said there was plenty of demand.
The kiwi peaked in the morning as US players pushed it higher. It closed near its opening on US79.20c.
Yesterday's higher than expected inflation data had economists firming up predictions of another rate rise next week, and had some, such as Westpac, punting on a fifth rise for the year next month.
The kiwi also gleaned support from a firming Australian dollar, which rose to US87.37c by the local close. The kiwi cross eased to A90.69c from its A91c opening.
The trade weighted index, measuring the kiwi against the currencies of New Zealand's five main trading partners, hit a fresh record of 76.08.
A Reuters poll taken after yesterday's CPI data had 10 of 17 forecasters favouring a rate hike on July 26.
The ANZ bank expects to see the NZ dollar remain well supported and even push gradually higher in the short-term.
"However, given the dizzying heights the NZD has reached over recent months, and as it approaches US80c in particular, we feel the risk of a significant reversal lower grows."
The insipid US dollar hovered near a record low against the euro and its weakest in more than 20 years versus sterling as concern about the US subprime mortgage market kept it under selling pressure.
"We're seeing ongoing weakness in the dollar due to concerns about the subprime market," said Hideaki Inoue, forex manager at Mitsubishi UFJ Trust and Banking, as Tokyo traders returned from Monday's holiday.
"The market wants to see exactly what impact recent problems in the subprime market will have on the rest of the economy."
Traders said any sign of concern by Federal Reserve Chairman Ben Bernanke about problems in the subprime market when he makes his twice-yearly testimony to Congress on monetary policy beginning on Thursday (NZT) could prompt more selling of the dollar.
Some traders were starting to feel uneasy about the dollar's broad weakness given a surge in US stocks this month, which saw both the Dow Jones industrial average and the S&P 500 Index climb to record highs on Monday.
The yen also struggled against high yielders, trading near a 22-year low against the New Zealand dollar and a 16-year trough versus the aussie.
Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US79.20c US78.81c
NZ dlr/Aust dlr A90.69c A90.36c
NZ dlr/euro 0.5747 0.5715
NZ dlr/yen 96.53 96.05
NZ dlr/stg 38.87p 38.70p
NZ TWI 75.81 75.47
Australian dollar US87.37c US87.24c
Euro/US dollar 1.3786 1.3790
US dollar/yen 121.88 121.84
- NZPA
