KEY POINTS:
The US79c mark has been breached - and US80c has now become the new benchmark for our soaring currency.
The New Zealand dollar hit a 22-year post-float high against the greenback overnight, after strong inflation data yesterday raised the spectre of an interest rate rise this month.
It is trading at US79.19c, after closing locally last night at US78.79 and peaking at one stage at US79.32c.
Since our dollar was floated, it has never attained such giddy heights. Exporters are feeling the pinch, whilst holidaymakers - apart from those on cruise liners out of Auckland - are feeling very comfortable indeed.
The kiwi traded in a narrow band after its peak and soon after 8am was buying US79.30c.
Against the Australian dollar, the kiwi rose through the night, from around A90.35c at 5pm yesterday to a week-high of A91c around 8am.
It was buying 0.5755 euro this morning from 0.5715 at 5pm yesterday and 96.61 yen from 96.05.
The trade weighted index was at 75.95 soon after 8am from 75.47.
New Zealand consumer prices rose 1 per cent in the second quarter, against market expectations of a 0.8 per cent rise and the Reserve Bank's forecast of 0.7 per cent.
The annual headline figure was 2 per cent compared with 2.5 per cent for the March quarter, because petrol prices are lower now than they were a year ago.
A key underlying measure of domestically generated inflation rose 1.1 per cent for the quarter, to be 4.1 per cent higher than a year ago.
A Reuters poll taken after the data had 10 of 17 forecasters now favouring a 25 basis point rate rise to 8.25 per cent on July 26.
The ANZ bank today said markets were now pricing in around a 75 per cent chance of a rate hike.
It expected 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 US dollar fell to multiyear lows against higher-yielding currencies overnight and remained near a record low versus the euro as investors braced for data expected to show declines in home construction and inflation.
Weakness in those reports would provide fresh incentives for US dollar bears, who punished the greenback last week as a deepening housing slump and a decline in retail sales further dented the case for higher US interest rates this year.
Against other currencies, the kiwi is trading at 90.76 Australian cents, 57.43 euro cents, 96.35 yen and 38.86 pence.
- REUTERS, NZHERALD STAFF
