The dollar was trading yesterday at US80.77c for the first time in more than three years. It also pushed up to 65.79 yen while being little changed against the Australian dollar at A74.85c and the euro at 0.5511.
The good news is that the trade-weighted index, the basket of currencies from New Zealand's major trading partners, is only showing slow appreciation in value and is nowhere near the highs of last year.
Overseas, the euro rose to a 16-month high against the US dollar. The greenback was sitting near a three-year low on a trade-weighted basis.
The Australian currency was trading at $US1.08, the highest since the currency was floated in December 1981.
The main problem appears to be a lack of direction from the United States Federal Reserve, which is lagging behind other major central banks in raising interest rates.
The Federal Open Market Committee, the Fed's policy-making arm, started its two-day meeting yesterday.
Today, chairman Ben Bernanke will hold the first regularly scheduled news briefing by a Fed chief in the US central bank's 97-year history. His comments will be closely analysed for signs of when the Fed plans to exit from its ultra-loose policy.
He expected the Fed committee to reiterate its intention to complete the programme as originally intended.
"Importantly, despite the likely weak first quarter GDP report, it is highly unlikely the Fed will signal another round of quantitative easing," he said.
If there was a start to unwinding QE2, there would probably be a slight pull-back in the market but it would be short lived, he said.
"We are now seeing good corporate earnings coming through from many companies, with Apple being one of the latest to announce a huge revenue increase."
With the New Zealand dollar-US dollar cross rate currently US80.77c, it was an opportune time for Kiwi investors to buy into the US market because it was likely there would be a good currency gain to be made over the next couple of years.
Many analysts were picking the dollar to be around the US72c mark in the latter part of 2011, Mr Young said.
BNZ currency strategist Mike Jones said that on a trade-weighted basis, the New Zealand dollar remained well below the highs of 2010 and even those of 2011. That was an indication of the extent to which US dollar weakness was contributing to the strength of the New Zealand dollar.
If global commodity prices continued their recent ascent, there was every chance of a test to the New Zealand dollar's post-float high of US82.13c in coming sessions, he said.
"Certainly, the commodities backdrop is still very strong. Gold and silver prices are making record highs on an almost daily basis and industrial metal prices are still very strong."
Downward pressure on the US dollar was applied by the expectation the Fed would keep its interest rate at virtually zero percent for some time, Mr Jones said.
That was in stark contrast to the European Central Bank, which raised rates earlier this month, and the Reserve Bank of Australia, which last raised its cash rate in November and was expected to raise it again in the next few months.
"It's a case of the US being left behind in a rising interest rates environment and that's providing a clear drag on the US dollar," Mr Jones said.
At a glance
• NZ dollar at three-year high against greenback.
• Australian dollar at 30-year high against greenback.
• Reserve Bank likely to keep OCR at 2.5% today.
• Federal Reserve likely to keep its cash rate at 0.25% today.
