The New Zealand dollar hit a new record against the Australian dollar overnight, with some analysts saying there is nothing to stop it pushing higher to parity.
The kiwi touched a post-float high of 97.07 Australian cents overnight, and was trading at 96.51 cents at 8am in Wellington, from 96.54 cents at 5pm yesterday. The local currency slipped to 75.19 US cents from 75.64 cents yesterday.
The Aussie dollar has weakened as softer demand for iron ore from China, the country's largest trading partner, dents exports and weighs on the economy. The Australian Reserve Bank this month cut interest rates to a record low 2.25 percent and traders expect further cuts may be looming. Meanwhile in New Zealand, dairy prices are recovering, boosting the outlook for the nation's largest commodity export, helping underpin economic growth as the Reserve Bank is seen keeping interest rates on hold at 3.5 percent.
"You have got the New Zealand Reserve Bank on hold and you have got Australia cutting interest rates and that is really the major reason, money is coming across the Tasman and it is pushing that exchange rate higher," said Derek Rankin, a director at Rankin Treasury Advisory. "Our economy is seen to be performing better than Australia."
Rankin is among the six in a BusinessDesk survey of 13 currency specialists this week who expect the kiwi to reach parity with the Aussie.
"Every week we are seeing another push at it," Rankin said. "Australia is coming off the boil and New Zealand is sharp so I think we are going to see continued pressure higher. There are no pressures for it to go down."
Still, he said the record levels were hurting New Zealand manufacturing exporters who bought products in US dollars, against which the kiwi is weakening, and exported to Australia.
In New Zealand today, the Treasury releases the crown accounts for the six months ended Dec. 31.
Chinese banks will be closed in observance of the Spring Festival.
The New Zealand dollar slipped to 66.15 euro cents from 66.23 cents yesterday amid reports Germany has rejected a Greek bailout extension proposal because it doesn't meet criteria set by Greece's Eurozone partners.
The kiwi weakened to 48.77 British pence from 48.96 pence yesterday, and dropped to 89.47 yen from 89.71 yen. The trade-weighted index fell to 78.05 from 78.36 yesterday.