New Zealand dollar hits 25-year high against U.S. dollar

The New Zealand dollar hit a 25-year high against the U.S. dollar Tuesday, with currency dealers saying demand was being driven by high yields on the country's fixed-income assets.

Photo: New Zealand dollar hits 25-year high against U.S. dollar

The local currency climbed to US$0.7494, passing the previous high of $US0.7493 in late afternoon local trading. That high was set mid-April on the back of figures showing persistently high domestic inflation.

The local unit was last above $US0.7500 when the country ran a so-called crawling peg currency, before 1985. The New Zealand dollar was floated in March 1985 at $US0.4440.

New Zealand's official interest rates at 7.75 percent are already the highest in the developed world and may go higher this week when the central bank reviews its official cash rate as it battles to control domestic inflation.

Only a decision to not lift the rates along with less hawkish commentary from the Reserve Bank would halt the New Zealand dollar's momentum, ANZ Bank said in a commentary.

The currency was also being lifted by investors borrowing yen at Japan's low interest rates and investing that money in New Zealand, analysts said.