22 Jul 2011

NZ dollar still rising

7:02 am on 22 July 2011

The New Zealand dollar has broken through 86 US cents, driven by signs the economy is growing and interest rates will rise soon.

Reports that eurozone leaders have reached a provisional agreement on tackling the Greek debt crisis, are also prompting investors to take bets on riskier currencies.

The kiwi set a new post-float high of 86.43 US cents on Friday morning, before easing a little. At 6.48am, it was buying 86.28 US cents.

ANZ Bank chief economist Cameron Bagrie says economic activity, while patchy, is picking up and inflation pressures signal the need to lift interest rates from its current record low.

But Mr Bagrie says there's a risk that financial markets could drive the exchange rate much too high, and choke off activity.

Mr Bagrie says the Reserve Bank should raise the cost of borrowing to 3% next week or in September, but the uncertainty about debt problems in the United States and Europe is staying its hand.