Close

Kiwi soars on back of Greek bailout

Kiwi soars on back of Greek bailout
The kiwi has soared to new heights on the back of a European bailout for Greece's ailing economy.

The kiwi has soared to new heights on the back of a European bailout for Greece's ailing economy.

The New Zealand dollar rose to a 26-year high of 86.42 US cents, according to BusinessDesk, before dipping to 86.21 cents. It dropped to 59.95 euro cents from 60.06 yesterday, and to 52.87 pence from 52.93 pence previously.

The Greek package is worth $109 billion euros ($182 billion) and will see its repayment schedule extended and interest rates lowered.

For the first time, private lenders, including banks, are also pledging support. The International Monetary Fund will also be involved.

The euro climbed to US$1.44 from US$1.42 yesterday.

Prime Minister John Key says the high exchange rate is causing pain for exporters.

He says strong demand for New Zealand's commodity exports has softened the impact of the exchange rate on those producers, but non-commodity sectors like tourism, education services and have taken a blow, Reuters reported.

"We haven't seen these levels since the 70s ... and it is going to dampen our economic growth if we can't get it under control," he said in response to a question at the US Chamber of Commerce.

Key, who is currently visiting the US, is due to meet with Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner

ASB chief economist Nick Tuffley says the NZ dollar is likely to remain high for some time yet.

"The currency is likely to sustain higher levels over the next 20 years than it did for the first 20 years after being floated in 1985," he told BusinessDay. 

He says the rise of Asia paired with the economic problems experienced by many Western countries would have a long-term impact, and expects the dollar to settle and hover around 75 US cents.