At 5pm yesterday the the New Zealand dollar hit US76.62c, well up on the US75.39c close in local trading on Friday, with the volatility attributed to the continued lacklustre performance of Western economies.
The rate with the Australian dollar also showed some volatility, closing yesterday at NZ77.53c after opening at NZ77.82c.
Despite this uncertainty, the ANZ commodity price index reached new heights in October, rising 3.5% for the month but in New Zealand dollar terms it rose 0.8%, reflecting the strengthening of the Kiwi dollar against the greenback.
ANZ chief economist Cameron Bagrie said the economy was fortunate demand for our commodity products from new and emerging markets was growing at a faster rate than the New Zealand dollar was appreciating.
In New Zealand dollar terms, commodity prices last month were 28% higher than they were a year ago.
He said continued weakness among traditional trading partners was creating a two-tier structure among exporters, with those trading in commodities to markets in Asia and Australia doing better than those relying on markets in Europe and the US.
"Export performance is very dichotomised depending on whether you are exporting commodities and where you are sending the stuff to."
BNZ economist Doug Steel said the US dollar was being buffeted by investor uncertainty ahead of Thursday's meeting of the US Federal Reserve open market committee, with speculation they could continue the quantitative easing policy and pump in between $US500 billion ($NZ660 billion) and $US2 trillion to stimulate the lacklustre economy.
By way of comparison, the New Zealand economy was about $190 billion in size, Mr Steel said.
Current exchange rate volatility was likely to continue given the uncertainty over the outcome of the US mid-term elections, scheduled meetings of the central banks of other major economies, and a host of economic data being released this week.
"The volatility is likely to continue in the foreseeable future," he said.
While the soaring Kiwi dollar was not welcome news for exporters, they were benefiting from shifting away from Western markets to the growing and stronger-performing economies in Asia and Australia, Mr Steel said.
"Australia and Asia are going a lot better and currencies are appreciating.
"The flip side is the Western world is struggling and the sterling, euro and US dollar are reflecting that," he said.
The price of nine of the 12 commodities measured by the ANZ commodity price index rose in October, while three fell.
The world price of wool soared 29% last month to reach a 21-year high, and in New Zealand dollar terms has hit a seven-and-a-half-year high.
The main movers were skin prices, which rose 10% last month, aluminium 8%, dairy, lamb and logs between 3% and 4% and seafood 2%.
Beef, sawn timber and apple prices slipped by up to 3%.
Mr Bagrie said strengthening commodity prices were creating pillars for a fundamental change in the economy.
"While weakness in housing and retailing tends to dominate reporting and the general feel-good factor, strong commodity prices are a winning quinella for the economy."
Rising commodity prices were allowing the rural sector to reduce debt and strengthen balance sheets while also providing revenue and a financial boost to the economy from sustainable and robust growth.
