The New Zealand dollar got close to US60c yesterday as sentiment about the global economy improved and investors started looking for better returns.
The dollar was trading at US59.4c at 5pm, up US0.83c from Friday.
A week ago the dollar was US56c, a month ago it was US50c and a year ago it was US79c.
Westpac is forecasting the dollar to be US52c in June, US50c in September and US47c in December, before reaching a low of US45c in March next year.
Currency was the story of the day for investors, with sterling hitting a two-month high against the United States dollar, the Australian dollar hitting a six-month high against the yen and the US dollar hitting a six-month high against the yen.
The yen slid towards a six- month low against the euro.
ABN Amro Craigs broker Chris Timms said a recovery in emerging market assets, buoyed by a global plan to help developing economies approved by the G20 meeting last week, added to investor appetite for riskier and higher-yielding currencies such as Australian and New Zealand dollars.
In times of turmoil, Japanese investors took their cash home and invested domestically.
However, at any sign of confidence or stability, the hard cash investors, particularly superannuation funds, started looking for better returns.
"People are ready to buy higher-risk assets for a higher return."
Bank of New Zealand currency strategist Danica Hampton said much of the recent New Zealand dollar strength was attributable to an improvement in sentiment towards the global economy.
"Investors have become hopeful that the dramatic policy measures taken worldwide will help shore up the global economy.
"There has been a huge equity market rally.
"The improving global outlook and strong gains across equities has seen growth sensitive currencies like the New Zealand dollar climb against `safe-haven' currencies like the US dollar."
Solid "real money demand" out of Japan had provided an additional boost for the New Zealand currency.
It was not just a global story, with the New Zealand dollar getting benefit from a general sense the New Zealand economy would come out of the global recession in relatively better shape than some others, she said.
New Zealand interest rates had risen, particularly across the New Zealand-US three-year swap rate, and commodity prices had rallied.
Ms Hampton warned the markets were still volatile and it would not take much for the dollar to be sold off.
"This is a fragile beast and we are looking at a US50c to US60c range for the rest of the month.
"I know that is a wide spread but the market is so volatile.
"Remember, we were above US60c in January."
