Exporter anguish could be on the rise again as bank economists pick a short-term strengthening of the New Zealand dollar, following the United States Federal Reserve's surprise caution on Thursday in not relaxing its quantitative easing programme.
The Federal Reserve's decision took sharemarkets by surprise and lifted the New Zealand dollar from US81.6c, to US83.83c at 5pm on Friday.
In deciding not to ease ''printing money'', or buying $US85 billion ($NZ101.4 billion) in US Treasury bonds every month which underpins the US sharemarkets, the Federal Reserve has effectively weakened the greenback, in turn making the kiwi stronger and offering a more attractive return for investors.
Forecasts earlier this week put the kiwi in range of US84c to US86c, but BNZ currency strategist Mike Jones and Westpac's Imre Speizer, separately, yesterday revised that range upward, both starting at US86C and respectively up to $US86.5c or US86.7c.
Mr Jones said the Federal Reserve's decision was ''unambiguously dovish'', and it had ''baulked'' at reducing the quantitative easing which everyone had expected, of between $US5 billion and $US15 billion.
''The Fed has provided zero guidance for when it might actually muster the courage to go ahead with tapering. We've pencilled in December, but this remains entirely dependent on the strength of US [economic] data,'' he said in a statement.
The greenback's positioning was becoming ''extreme'' and the Federal Reserve wanted to move cautiously and keep monetary policy loose ''for a considerable period'', Mr Jones said.
Mr Speizer said markets were ''significantly surprised'' by the Fed's decision, which would keep downward pressure on the US dollar ''for the month ahead at least, possibly to December''.
''The New Zealand dollar against the US dollar should reach US86c, with a chance of a break above US86.75c,'' Mr Speizer said.
That was because without any support for the greenback, the exchange rate was free to express the New Zealand economy's ''improving fundamentals''.
Mr Jones said among several reasons for the kiwi strengthening was ''traditional'' New Zealand fundamentals being ''still stacked in favour of New Zealand dollar strength''.
Global commodity prices were within ''spitting distance'' of record highs and only a gradual decline was expected, while the relative growth of the difference between the two countries' respective interest rates was ''skewed in New Zealand's favour''.
Mr Jones said the New Zealand Reserve Bank, which only last week raised its 90-day interest rate on the back of expectations of a weakening currency, would be causing ''consternation''.
''This increases the risk the Reserve Bank will be forced to push its rate forecasts back down again,'' he said.
The trade weighted index was already 4.4% up on Reserve Bank forecasts last week for the third quarter and, if pushed further, the bank could start selling the kiwi, Mr Jones said.
