Key says debt crisis could see dollar go higher

The greatest impact of the United States debt crisis on New Zealand is the rising dollar, Prime Minister John Key says.
The kiwi this morning yet again hit a post-float high as it came within a whisker of US88c.
At the same time, the US dollar fell to a record low against the Swiss franc and a four-month trough against the yen, both traditional safe-haven currencies, as weak data on US economic growth ignited fears the economy could slip into another recession.
Politicians in the US continued to wrangle over a plan to cut American spending, raise the nation's borrowing limit and avert an unprecedented debt default, as party leaders continued to express optimism that an agreement would be reached.
Mr Key, who has just returned from visiting the US, told Newstalk ZB he thought US politicians would be able to eke out a deal but they were taking it to the wire.
``They were a lot more confident when we were in Washington 10 days ago that a deal would definitely be done and I think it was unthinkable that they could not reach an accommodation. It's getting very, very close now.''
The New Zealand dollar had increased during the crisis and would track even higher if a deal was not reached.
``You would expect our exchange rate to track even higher,'' he said.
``You've seen the NZ-US exchange rate moving up on the back of the deep concern that the financial markets have that the US might not get a deal done and that overall the US economy.''
Other flow on effects would be a slowing of the US economy.
``It just sends a wave through the world's financial markets that can't help New Zealand.''
Mr Key said the crisis showed his Government was right to constrain spending and work to reduce debt.