KEY POINTS:
The New Zealand dollar charged into uncharted territory today, peaking this afternoon at US75.54c.
Its US75.45c close was the highest since the currency was floated in March 1985 at US44.4c. It closed yesterday at US74.90c.
The market was also on tenterhooks as to whether the currency would get
another boost from the Reserve Bank tomorrow.
Most economists expect bank governor Alan Bollard to stay his hand on interest rates, but economists from ANZ and Westpac pick he will hike the official cash rate to 8.0 per cent.
Whatever his action, his rhetoric was likely to be hawkish, possibly more so than his last statement, when he seemed to signal the end of the three-year tightening phase.
The kiwi's rise has been far from limited to the US dollar. The trade-weighted index, measuring the kiwi against the currencies of New Zealand's five main trading partners, closed on 73.12, its highest level apart from a week in early December 2005.
Against the euro, the NZ dollar rose from 0.5550 to a fresh 15-month high of 0.5578. Although the kiwi eased from a new 17-year high against the yen, of 91.76, set in the morning, it ended the session not far off at 91.59.
Against the Australian dollar the kiwi peaked at a six-week high of A89.96c in the morning but fell back at the close to A89.50c after Australian announced much stronger-than-expected GDP data.
The Australian economy sprinted ahead at 1.6 per cent in the March quarter, its fastest pace in over three years and far quicker than the 1.2 per cent economists had forecast.
That powered the aussie to a fresh 17-year high against the greenback, ending here at US84.30c compared with US83.57c yesterday.
Despite the rapid growth, the Reserve Bank of Australia saw no need to hike interest rates.
"It's fantastic. You have strong growth and low inflation. It really doesn't get any better than this," enthused Adam Carr, a senior economist at UBS.
"We don't see this GDP release as a smoking gun for a near-term rate hike but we certainly think that if this pace is sustained over the rest of this year, we are looking at rate hikes in 2008," he added.
Dealers said if New Zealand hikes its cash rate tomorrow to 8.0 per cent, that will leave a yawning 1.75 percentage point differential -- one that investors will find too tempting to ignore.
The hunt for yield hurt the US dollar against currencies whose rates are seen heading higher.
The European Central Bank is widely expected to hike its rate to 4.0 per cent tomorrow but investors are waiting to see whether the ECB will signal its credit tightening campaign is getting closer to an end.
Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US75.45c US74.90c
NZ dlr/Aust dlr A89.50c A89.63c
NZ dlr/euro 0.5578 0.5550
NZ dlr/yen 90.59 91.27
NZ dlr/stg 37.81p 37.61p
NZ TWI 73.12 72.83
Australian dollar US84.30c US83.57c
Euro/US dollar 1.3524 1.3502
US dollar/yen 121.36 121.78
- NZPA