NZ dollar keeps soaring against greenback

The New Zealand dollar reached its highest level against the greenback in almost eight months early today after a bumpy night.

The kiwi peaked around US65.95c about 5.30am, after dropping below US64.50c briefly yesterday evening. By 8am today the NZ dollar was buying US65.75c.

Safe haven demand for the United States currency weakened further overnight as upbeat US housing data reinforced optimism about the health of the global economy.

ANZ Bank said a relatively small dip in early European trading brought forth further demand for the NZ dollar against the backdrop of US dollar weakness.

BNZ Capital currency strategist Danica Hampton said the NZ dollar had run with the broader market momentum because of the backdrop of a sound economy, banking system and official policy moves.

In a short amount of time New Zealand's trade weighted index had moved back towards its long term average -- having climbed 4 per cent last week and 9 per cent in the past month, said Hampton.

Currency analyst Derek Rankin of Rankin Treasury Advisory, who for some time has predicted continued gains by the local unit against the US dollar even as other commentators insisted New Zealand's economic fundamentals didn't justify current levels, yesterday said those same fundamentals "don't really matter".

"It's what's going on in the US dollar that really matters."

"The New Zealand dollar's gone up a bit too fast but the trend is what it is."

Rankin said given the speed of the kiwi's gains, a pullback towards US62c to US63c was on the cards, but the general trend higher would remain in place and US70c was likely later this year.

"I just think that things are gradually getting better out there when a lot of these economists are focusing on all the negative stuff."

BNZ economist Craig Ebert yesterday suggested international investors were overestimating the local economy's ability to sustain such high levels in the currency.

"As per normal the New Zealand dollar will spend 44 weeks a year grinding higher and eight weeks in free fall.

"The currency is at elevated levels and though there are still shorts [bets it will fall] in the market, the people that are long are not long-term holders. A turn in equities or commodities, both of which are near their 200-day moving average, could inspire one of those eight week [periods] to occur," he said.

The trade weighted index was at 61.38 around 8am today from 60.95 at 5pm yesterday.

Despite its strong overnight performance, the NZ dollar failed to regain the multi-month highs reached early yesterday against the European and Japanese currencies.

By 8am the kiwi was at 62.81 yen from 62.50 at 5pm, and was up to 0.4591 euro from 0.4574. Against the Australian dollar the kiwi was little changed at A80.05c by the local open.

- NZPA/ NZ HERALD