31 May 2011

Dollar surges to another record high

7:28 pm on 31 May 2011

The New Zealand dollar has hit another post-float high.

The kiwi reached US82.6 cents early on Tuesday afternoon - its highest level since it was floated in March 1985 - but has since lost ground.

The day before, it had passed US82.15 cents - which at that point was its highest post-float level.

A National Bank survey showing business confidence up sharply for the second month in a row in May pushed the dollar to its new high on Tuesday.

The kiwi had been trading just under US82 cents in the morning, buoyed by newspaper reports in the United States on the European debt situation.

Those reports suggested that owners of Greek debt will not face immediate losses, with international loans to the troubled southern European country reportedly set to be extended.

Earlier, Finance Minister Bill English said he was concerned about the value of the New Zealand currency, saying the currency's strength is a problem for the economy - particularly for exporters.

Mr English said the Government is doing its bit to take the pressure off the dollar by bringing its own debt under control.

The Reserve Bank has the power to intervene, but Mr English did not know whether it has done so.

Intervention 'unlikely'

Westpac currency strategist Imre Speizer says the trade weighted index (TWI) is not high enough to justify the Reserve Bank intervening to bring down the dollar's value.

The index measures the value of the New Zealand dollar relative to the currencies of the nation's major trading partners.

Mr Speizer said the Reserve Bank last intervened to bring down the value of the kiwi in 2007 and 2008, when the dollar was buying about US80 cents.

But Mr Speizer said the TWI was still below that of 2007 and 2008 by 3% to 4% and the intervention threshold may in fact be higher than it was then.

Mr Speizer believed the dollar could reach US85 cents in the next few weeks.