22 Dec 2014

Dollar tipped to soar against Australian

6:13 am on 22 December 2014

The New Zealand dollar is threatening to overtake its previous post-1985 float high against the Australian dollar.

The kiwi is trading just above 95 Australian cents.

Rankin Treasury Advisory managing director Derek Rankin said the current pressure points were all on the upside.

Mr Rankin said one of those pressures was that New Zealand interest rates were significantly higher than Australia's. For example, five-year government bonds were more than a percentage point higher.

He said the country's agricultural sector was also going into its export season.

"We have a growing season, we have the summer months and exporters tend to bring a lot more cash back when that's happening because that's when the trade is happening."

Mr Rankin said Australia's agricultural sector is dwarfed by its mining sector, which does not have a defined season.

"So we tend to out-perform the Australian dollar over the summer months, generally through January and into February," he said.

He said the New Zealand dollar hit a high of 95.54 cents against the Australian in 2005 but by August the following year was back at 80 cents.

Mr Rankin believes that high will be surpassed and the New Zealand dollar will reach the 98 cent mark.

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