The New Zealand dollar is continuing on its upward trajectory with news out of both Japan and the United States likely to keep the currency at recent highs.
Although there will be some blips against the greenback, the kiwi is set to remain above US85c for an extended period.
BNZ currency strategist Mike Jones is forecasting the dollar to rise against the yen with a peak of 91 picked for March next year.
''Valuation analysis suggests 95 is not outside the bounds of possibility.''
The reason for the rise against the yen was the large quantitative easing of monetary policy announced last week by the Bank of Japan, he said.
''It's a big deal.''
Adding up all of the planned easing measures suggested that the balance sheet of the Bank of Japan was set to expand at an annual rate of 60 trillion to 70 trillion ($NZ715 billion to $NZ830 billion), significantly faster than some of the other ''money printers'', notably the United States Federal Reserve.
Assuming the Bank of Japan delivered on its commitment to double the monetary base in two years, and that the Fed's monetary base expanded at close to its medium-term average of 4.5%, those ratios suggested the US dollar moving up into 100 to 110 levels. At those levels, that would put the kiwi at 85 to 95, Mr Jones said.
The reason for the sudden rise in currencies against the yen came down to surprise at the extent of the easing. The Fed signalled its easing and the greenback fell steadily either ahead of the start date or early on in the programme.
Mr Jones said that since the global financial crisis hit, Japanese ''real money'' investors had sought shelter in low- risk, low-yielding Japanese government bonds. But the prospect of ongoing extremely low returns and yen depreciation might encourage a shift towards higher-yielding, offshore assets.
In the past, the ''carry trade'' had a large impact on the cross rate between the kiwi and the yen, he said.
''Given the enormous funds under management of the Japanese life insurance and pension sector, this effect could potentially be large.''
A switch back to a 50% offshore allocation from the current roughly 35% would imply a flow of funds of about $US200 billion ($NZ234.3 billion), Mr Jones said.
