The kiwi dollar may be at a record high today, but a leading economist says it may still have further giddy heights to scale in the coming months.
And the chief executive of one of New Zealand's main exporters said today he would not be surprised if the high dollar acted to drive more businesses offshore.
The currency has climbed well above 81 US cents, reaching a zenith of 81.37 at 11am.
Worse may yet be to come, with one economist saying the dollar could easily get to 85 US cents in a matter of months.
Export New Zealand is calling on the Reserve Bank to give businesses a break by reducing interest rates, and this call is echoed by Fisher & Paykel CEO John Bongard.
Last year, the company announced plans to move part of its manufacturing operation to Thailand. Mr Bongard says high interest rates and the exchange rate will no doubt see more businesses look at similar options. He is very concerned about what is being labelled the hollowing-out effect on the New Zealand economy.
He accepts the Reserve Bank cannot do much without a change in government policy, but believes the exchange rate does need to be targeted. He says the volatility of the currency makes managing a business very difficult.
BNZ Chief Economist Tony Alexander says the currency is still well-supported by commodity prices and interest rates and says a value of 85 cents against the greenback is very likely.
He says interest rates across the Tasman are also playing a big part. He says the kiwi is riding the wave of a soaring Australian dollar, driven up by high prices for iron ore and coal.
Mr Alexander says if there was any chance of the Government influencing the currency, it would have done so by now.
Around 5am today the kiwi hit a high of US81.14c, according to Reuters data.
That was its highest level since being floated in March 1985, just slightly above the previous post-float peak of US81.1c reached last July.
By 8am the NZ dollar had slipped to US80.87c, similar to the US80.82c it was buying at 5pm yesterday.
Overnight the United States dollar and euro both gained against the yen as positive news for the US bond insurance sector boosted appetite for stocks and other riskier assets.
Hopes that a possible rescue plan for troubled Ambac Financial Group, the second-largest US bond insurer, would help limit the damage from the ongoing credit crisis bolstered investor confidence.
High-yielding currencies tend to benefit in such an environment as investors favour riskier carry trades, where low-yielding units like the yen are sold to fund purchases of higher-yielding and riskier assets, such as the NZ dollar.
The kiwi also performed strongly overnight against other currencies.
It reached a 4-1/2-month high against the euro of 0.5476 before easing to 0.5456 by 8am. Against the yen it touched a two-month high of 87.69, then slipped to 87.33.
The NZ dollar also hit a two-week high against the Australian dollar of A87.78c, before dropping to A87.54c by 8am.
- NZPA, NEWSTALK ZB