28 Mar 2014

Dollar soars against Greenback

9:57 pm on 28 March 2014

The New Zealand dollar is continuing to hover near two-and-a-half-year highs against its American counterpart.

The currency has risen to US86.96 cents on Friday - the highest it's been since August 2011.

dollars and coins


Analysts say the dollar rose in the afternoon following comments by China's Premier Li Keqiang that indicated its authorities would support the Chinese economy if need be. China is New Zealand's largest trade partner.

The currency had already shot up overnight on Thursday, after strong trade data and the Reserve Bank's deputy governor Grant Spencer saying a higher dollar wouldn't stop the central bank from raising interest rates further.

The dollar has already risen nearly 6 percent this year. However, economists say it is unlikely that it will hit its post float high of US88.43 cents, which it did in late July 2011.

ANZ senior currency strategist Sam Tuck said Mr Spencer's remarks at an investment conference in Hong Kong that New Zealand exporters had adapted to the high exchange rate had helped drive up the dollar.

However, those comments are just one reason the Kiwi is strong, he said. "The markets are still concerned about US and global growth. The attraction of a high yield and a growth economy is driving markets to seek the yield of the New Zealand and Australian dollar."

Mr Tuck said the forecast was for the New Zealand dollar to fall to about US83 cents in the next two quarters.

ASB's head of foreign exchange sales Tim Kelleher said the currency may drop to US84 cents in the short term, but because another increase by the Reserve Bank of the Official Cash Rate is due, it is difficult to imagine it dipping further.

The head of Export NZ Catherine Beard said dollar's value is challenging, but exporters have been coping with the tough conditions for some time. "I think companies are certainly doing a lot to try and adjust and hang on in there."

At 5.20pm on Friday, the Kiwi was trading at 86.79 US cents, 93.54 Australian, 52.21 British pence, 0.6313 euro, 88.63 yen and 5.39 renminbi.