WELLINGTON - The New Zealand dollar today pushed to new seven month highs against the US dollar and on its trade weighted index.
Demand from Japanese buyers was behind much of the rise as well as switching out of the Australian dollar, which has been hit by falling prices for hard commodities.
Against the greenback, the kiwi dollar rose to US66.38c at 8am from US65.35c yesterday at 5pm, and the trade weighted index was stronger at 66.87 (66.82), its highest level since early March.
The kiwi was the best-performing major currency in the past month with high bond yields buoying it. It gained 1.8 per cent against the US dollar.
Sales of New Zealand dollar-denominated Uridashi bonds to Japanese individuals are underpinning the currency as they chase high yields.
The World Bank sold $282 million of two-year bonds on Wednesday.
BNZ strategist Danica Hampton said the rise in Uridashi-type issuance showed investors were chasing yield, but she doubted the kiwi would rise higher.
"We believe the NZ dollar might have overshot the levels suggested by interest rate and commodity price differentials.
"So the potential for profit-taking should probably limit the topside over the coming fortnight."
She predicted the kiwi would struggle to breach US66.60c and would trade in a US65.50-66.60c range over coming weeks.
Against the aussie, the kiwi yesterday broke above A89c for the first time since early March and today traded just below that level at A88.98c.
Meanwhile, the euro weakened against the dollar and yen after the European Central Bank president signalled that interest rates will rise once more this year, but provided no clear signal on any further euro-zone tightening.
The US dollar held its gains as Philadelphia Federal Reserve president Charles Plosser renewed expectations of further increases in US interest rates, which he said may not be high enough to stem inflationary pressures.
The ECB raised its key lending rate to 3.25 per cent, as expected. Bank president Jean-Claude Trichet provided no clues on the outlook for rates in 2007, disappointing some euro bulls looking for a more hawkish tone.
- NZPA
NZ dollar pushes on to new seven month highs
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