26 May 2011

Dollar makes significant gains

8:05 pm on 26 May 2011

The New Zealand dollar has made major gains on Thursday afternoon.

The Kiwi gained 1.5 cents against the US dollar and is at a two-year high against an average of trading partners' currencies.

Strong Australian economic data and China's decision to financially back the bailout of Portugal lifted the New Zealand dollar against all major currencies.

A local news wire claiming China's biggest sovereign wealth fund is targeting New Zealand assets also added to the momentum.

At lunchtime on Thursday, the dollar was buying US79.70 cents, but by 6.25pm was at US81 cents.

Westpac currency strategist Imrie Speizer says if it breaks through US81.2 cents, the Kiwi could attract even more buyers.

Mr Speizer says this week's strong Fonterra forecasts, as well as strong inflation expectations data, has encouraged a view that the Reserve Bank may raise interest rates earlier than previously expected.