The New Zealand dollar hit its straps as it notched up a new 30-year high by surging above US85c against the greenback.
The US dollar slumped after Federal Reserve chief Ben Bernanke said the Fed could resort to a third round of monetary stimulus if the United States economy weakened further, and the kiwi received a boost from news that gross domestic product (GDP) data showed the economy grew far faster than expected in the first quarter.
Reuters data showed the kiwi rising overnight from its US82.14c level at 5pm yesterday and jumping sharply about 2am before accelerating to another big spike at mid-morning when the GDP data was released. By lunch it had hit US85.08c during the day's trading, after rising more than US2c from a breakfast-time dip.
At 5pm it was trading at US84.33c in a retreat from the intra-day high, which was slowed by more panic-selling of the US dollar overseas. This happened when the greenback was hit by a double whammy when credit ratings agency Moody's warned the USA could lose its top-notch rating if lawmakers failed to increase the country's debt ceiling.
In a statement, Moody's said it saw a "rising possibility that the statutory debt limit will not be raised on a timely basis, leading to a default on US Treasury debt obligations" - in line with comments other agencies such as Fitch and Standard and Poor's made weeks ago.
This perfect storm meant the NZ dollar became one of the best performing currencies of the day as the US dollar hit a record low against the Swiss franc, and fell against the euro.
One veteran politician, Sir Roger Douglas commented on the surprisingly robust 0.8 growth in the GDP: "If we are lucky, by this time next year we may be back to where we were in 2008.
"By 2014 we might even gain back what we've already lost between 2008 and 2011," he added.
But such long-term considerations were not driving the jittery investors today, as the NZ dollar also rose to 0.5929 against the euro at 5pm, from 0.5873 at the same yesterday.
There was a similar lift against the British pound, to 53.33p, from 51.63p, and the Japanese yen, where the exchange rate lifted to 66.34 at 5pm, from 66.30 yesterday.
The trade-weighted basket of currencies jumped to 72.58 points, from 71.39 yesterday.
The NZ dollar made gains against the Australian dollar, to A78.46 at 5pm from A77.35c at the same time yesterday, but the aussie itself was up only half a cent against the US dollar at $US1.0746 from $US1.0619 yesterday.
The euro held gains even after Fitch downgraded Greece deeper into junk territory, citing the absence of a new and fully funded financing programme, and at 5pm was at $US1.4224, from $US1.3987 yesterday.
