Kiwi hits monthly high. Where to now?
The New Zealand dollar topped US87 cents for the first time in six weeks after the United States Federal Reserve cut its long-term interest rate forecast.
The kiwi was trading at about US86.5c at midnight but rose strongly after a speech by Federal Reserve chairwoman Janet Yellen, rising to a high of US87.32c just after 8am.
It last traded above US87c on May 7.
Yellen signalled that the Federal Reserve would start raising interest rates earlier than expected but cut the US central bank's long-term interest rate forecast from 4 per cent to 3.75 per cent.
The Federal Reserve has kept its interest rate at near 0 per cent for now, well below the Reserve Bank of New Zealand's official cash rate, which was increased to 3.25 per cent last week.
Westpac senior market strategist Imre Speizer said markets had taken more notice of the Federal Reserve's long-term forecast than its short-term forecasts.
Bond yields and US interest rates fell after the announcement.
"The bigger picture is the main driver upward is rising interest rate carry," Speizer said.
"New Zealand interest rates are rising faster than those in other major markets and as a result our interest rates are looking increasingly attractive and attracting people into parking their money in the Kiwi currency."
He said the New Zealand dollar could go as high as US87.80c, the high point reached the last time the kiwi went above US87c.
The dollar would continue to rise against the euro, possibly reaching 66 euro cents within the next two months, he said.
It was trading at 64.2 euro cents about 9am today.
However, he said the kiwi would continue to go "sideways" against the British pound, against which it was trading at 51.3 pence about 9am.
Bank of England governor Mark Carney recently indicated he would start raising interest rates to cool Britain's hot property market.
Speizer said today's gross domestic product figures were unlikely to make a huge difference to the dollar, although there could be a small bounce if it came in above the Reserve Bank's forecast of 1.1 per cent growth in the March quarter.