The New Zealand dollar could potentially hit US90c against the greenback over the next few weeks, a currency strategist says.
The kiwi hit another post-float high of US86.40 overnight, but has since slipped back and was trading at US86.17 at 11.15am.
"As the [New Zealand dollar] continues to appreciate, it [a cross-rate of US90c] does begin to look quite likely," said BNZ currency strategist Mike Burrowes.
He said there would be more focus on the United States debt ceiling debate overnight. The US Government is considering increasing the amount of money it is allowed to borrow, to avoid a default.
"That's causing some US dollar weakness, which is helping to keep the New Zealand dollar up [against the greenback]," Burrowes said.
But he said it paid to keep an eye on the "fundamentals", such as commodity prices.
Prices on Fonterra's online auction fell this week, confirming market opinion that dairy prices are on a downward trajectory.
"Terms of trade are showing signs of falling - those sorts of things suggest that there's no reason the [New Zealand] currency can't pull back a little bit over the next couple of weeks."
The kiwi hit A80c against the Aussie currency yesterday.
Burrowes said interest rate and growth differentials between Australia and New Zealand would favour an appreciation in the kiwi's value against the aussie dollar over the next 12 months.
Prime Minister John Key says the rising New Zealand dollar will dampen economic growth if the currency cannot be brought under control.
Answering questions following a speech to the US Chamber of Commerce, Key acknowledged the high NZ dollar, which hit a 26-year high of 86.4 US cents overnight, was hurting the economic recovery, Reuters reported.
The New Zealand dollar rose to a new post-float high against the greenback, after European leaders agreed to a fresh bailout package for Greece.
Under the deal, all three countries with bail-out programmes, Greece, Ireland and Portugal, will have interest on their debt lowered by between 100 to 200 basis points to 3.5 per cent, and have their repayment schedules extended from seven years to a minimum of 15 years.
"There's no getting away from the fact (that the current high exchange rate) is very difficult for our non-commodity-linked exporters," Reuters reported Key saying.
"We haven't seen these levels since the 70s ... and it is going to dampen our economic growth if we can't get it under control," Key said.
The Greek deal saw the European single currency surge over a cent to US$1.43.77 from US$1.42.40 yesterday, dragging growth-linked currencies such as the New Zealand and Australian dollar with it.
Global markets were also buoyed by the deal, with the Standard & Poor's 500 Index closing 1.4 per cent higher to 1343.80, while Europe's Stoxx 600 closed 1 per cent up at 270.48.
Key told Chamber members the US Federal Reserve's quantitative easing policies had the effect of devaluing the US dollar, which was pushing New Zealand's currency up.
"That obviously has concerns from an exchange rate point of view from our perspective," Key said.
However US policy makers had to make their own judgements about what was best for the US economy, Reuters reported him saying.
Tim Kelleher, head of FX sales New Zealand at ASB Institutional said: "It's hard to stand in the way of momentum, and unless anything untoward happens I expect the kiwi to keep grinding higher."
The kiwi recently traded at 86.21 US cents, up from 85.87 cents yesterday, and rose to 73.82 on the trade-weighted index of major trading partners' currencies from 73.71.
It fell to 79.52 Australian cents from 79.83 cents yesterday, and gained to 67.67 yen from 67.40 yen. It dropped to 59.95 euro cents from 60.06 cents yesterday, and slipped to 52.87 pence from 52.93 pence previously.
The US dollar came under pressure after the latest Philadelphia Federal Reserve Survey doing little to allay fears that the US economy is slowing.
Activity in the Mid-Atlantic manufacturing sector rose 3.2 points in July, short of the 5.5 points expected, but an improvement on the 7.7 point decline seen in the previous month. The Dollar Index, a measure of the greenback against six major currencies, fell to 74.14 from 74.73 yesterday.
The kiwi may trade between a range of 86 US cents and 86.50 cents, Kelleher said.
-With INTEREST.CO.NZ / BusinessDesk