NZ dollar at 11-month high vs. A$ as central banks vie for lower currency

The New Zealand dollar rose to an 11-month high against its trans-Tasman counterpart as investors weigh up the competing attempts by the neighbouring central banks try and talk their respective currencies lower in a market where they offer attractive returns.

The kiwi rose as high 95.26 Australian cents today, trading at 95.12 cents at 5pm in Wellington from 94.71 cents yesterday. The local currency rose to 77.80 US cents at 5pm from 77.34 cents at 8am and 77.13 cents yesterday.

New Zealand's dollar is at the highest level against its Australian counterpart since Jan. 24 this year, which was the first time it had been higher than 95 cents since late 2005. Investors have been shying away from the Australian currency as policymakers come to grips with the peak of its resources boom, leaving New Zealand more attractive to traders seeking high-yielding assets over the holiday period.

"Both Reserve Banks are ravenously trying to speak their currency down in NZ and Australia," said Alex Hill, head of corporate FX at NZForex in Auckland. "It's almost the currency wars in the kiwi and Aussie, but the RBA's winning."

The lack of liquidity in the market ahead of the holiday period increased volatility, and was helping the kiwi test higher levels, Hill said.

That volatility will likely persist over the next two abbreviated trading weeks, with plunging oil prices and attempts by Russia's and Switzerland's central banks to manipulate their respective currencies keeping traders wary.

New Zealand government figures reported net migration rose to a new annual record in November, while the ANZ Business Outlook survey showed firms are still optimistic about the local economy.

The kiwi rose to 92.78 yen from 91.45 yen yesterday as the Bank of Japan maintained its quantitative easing programme, as falling oil prices make it more difficult for governor Haruhiko Kuroda to stoke inflation in the economy.

The kiwi climbed to 63.34 euro cents from 62.47 cents yesterday, and increased to 49.66 British pence from 49.48 pence. It gained to 4.8420 Chinese yuan from 4.7918 yuan yesterday.