KEY POINTS:
The New Zealand dollar surged through the US78c level early today to yet another post-float record on strong local and Asian demand, as the greenback continued to weaken.
The kiwi peaked around 3.45am at US78.35c, according to Reuters data, its highest level since the currency was floated in March 1985.
The climb had started from slightly above US77c when the local market opened around 8am yesterday.
The Reserve Bank has been so concerned about the soaring dollar that in the last month it has tried to intervene, selling New Zealand dollars in an effort to moderate the climb.
The NZ dollar's rise came as the greenback declined across the board, tumbling to a 26-year low against sterling, as lingering worries about the US housing sector reinforced views that US interest rates would remain steady while borrowing costs rose elsewhere.
The ANZ bank predicted today that further US dollar weakness was likely to combine with more local and offshore demand for the kiwi.
In that environment a NZ dollar level of US80c was "a matter of when not if", ANZ said.
Even a stronger yen had done little to dent appetite for the carry trade, where investors borrow low interest rate currencies, such as the yen, to invest in higher yielding assets, such as the kiwi.
As well as the kiwi, the Australian dollar and sterling had been well supported overnight, ANZ said.
The kiwi also rose throughout yesterday and overnight against the yen and euro, although less emphatically than against the greenback.
It peaked around 3.45am today against the yen at a multi-year high of 95.79, and against the euro around the same time at 0.5748, the highest since January 2006.
Against the aussie, the kiwi's movement was more erratic, but it did spike to A91.17c around 7pm yesterday, the highest level since February 2006.
The trade weighted index also hit another post-float high around 3.45am today, getting to 75.51.
The US dollar fell overnight to within half a cent of a record low against the euro, extending Friday's heavy losses after soft reports on US consumer price inflation and personal income and spending.
Concerns about the US subprime mortgage market -- amplified over the past week by trouble at two Bear Stearns-managed hedge funds -- have also dented investors' appetite for risk.
ANZ said that while a large amount of risk aversion was negative for the kiwi, a small amount generally was not, as the NZ dollar was seen as a safe haven and riding on the back of a stronger euro and aussie.
The Bank of England was expected to raise interest rates on Thursday, while the European Central Bank was also expected to tighten monetary policy in coming months, reducing the relative allure of the US dollar at a time when the Federal Reserve was expected to keep US interest rates on hold.
