New Zealand dollar hits highest level for quarter century

WELLINGTON , April 18, 2007 (AFP) – The New Zealand dollar hit its highest level against the US currency for 25 years on Wednesday after inflation data reinforced expectations of further interest rate increases. High interest rates have made the New Zealand currency attractive to foreign investors while weakness in the US dollar has also helped push the local unit higher.

The New Zealand dollar hit 74.76 US cents in late morning trade following the release of the inflation data.

The level was the highest since 1982 when the currency was in a managed regime known as a ‘crawling peg,’ which limited its movement.
The currency was floated freely at 44.44 US cents in March 1985.

The persistently high level of the dollar has raised alarm among exporters, whose returns in New Zealand dollar terms are reduced because most exports are sold in US dollar terms.

Inflation in the March quarter was 0.5 percent on a sequential basis and 2.5 percent compared with a year earlier, which was slightly below economist forecasts.

But inflation during the quarter in the non-tradeables sector — which reflects inflation in the domestic economy — was 1.2 percent, according to Statistics New Zealand.