The dollar broke through the psychological US80c level yesterday for the first time since it was floated in March 1985 - its high yield and the prospect of an interest rate rise later in the week proving irresistible to investors.
The kiwi set a 22-year post-float high ofUS79.96c late in the local session, having spent much of the day quietly range-trading, then spiked higher in early offshore trade - hitting US80.07c in Tokyo.
"Heavy option-related selling ahead of barriers around the US80c region may help cap the topside to the dollar," said Bank of New Zealand currency strategist Danica Hampton.
This week's Reserve Bank official cash rate review on Thursday remained the key event for investors and the prospect of a quarter point rate rise to 8.25 per cent was underpinning the kiwi.
"The dollar is unlikely to break below US78.80c this week in the absence of a US dollar recovery or a major bout of carry trade unwinding," Hampton said.
Eleven of 17 forecasters in the latest Reuters poll expect the Reserve Bank to raise rates and some have also suggested a further tightening may occur at the September review.
The kiwi was helped by a weak US dollar which hit a record low against the euro, hurt by concerns that troubles in the American subprime mortgage sector might slow US growth.
The kiwi showed no sign of easing in early-morning trade today.
