The New Zealand dollar is heading for a 4.3 percent weekly gain against the yen, adding to last week's 4.2 percent increase, as investors buy into the Japanese central bank's massive money-printing programme to revive the country's stagnant economy.
The kiwi increased to 85.75 yen at 5pm in Wellington from 85.58 yen yesterday and hit a five-year high 86.13 yen during the trading session. It traded at 86.23 US cents at 5pm from 86.32 cents this morning and 85.92 cents yesterday.
New Zealand's currency has been one of the biggest benefactors of the Bank of Japan's goal to double its monetary base in a plan to rival the Federal Reserve and raise inflation to an annual pace of 2 percent.
That flood of new money has looked for assets that offer positive returns and have underpinned gains in stock markets and risk-sensitive currencies such as the kiwi and Australian dollars.
"The market is going all the way pricing in the Bank of Japan achieving its target – it's hard to see the weakness in the yen continuing at this breakneck pace," says Mike Jones, currency strategist at Bank of New Zealand in Wellington.
"The Aussie and the kiwi are probably the two bigger benefactors of the cash that's come out of Japan."
New Zealand's 10-year government bonds yielded 3.38 percent at 5pm in Wellington, almost 280 basis points more than their Japanese equivalent.
The kiwi is heading for a 2.3 percent weekly gain on a trade-weighted basis, with the yen driving much of those gains, and the trade-weighted index reached a new post-float high of 79.39. It was 79.15 at 5pm from 79.11 yesterday.
Those gains stemming from the yen weakness may abate next week as finance ministers central bank heads of the Group of 20 nations meet in Washington next week, and may discuss monetary policy action that is devaluing currencies.
Still, Mr Jones isn't convinced that will prompt a turnaround in the kiwi, saying the relatively strong yields and improving economic data are attracting investor interest.
He scotches suggestions the Reserve Bank may consider intervening, saying "it would be regarded as a better level to get long on the kiwi". A long position is when an investor bets an asset will gain in value.
New Zealand's first quarter consumers price index is slated for release next week and is expected to show a quarterly pace of 0.4 percent and an annual pace of 0.9 percent, just short of the central bank's target band of between 1 percent and 3 percent.
The local currency was little changed at 65.72 euro cents from 65.79 cents yesterday and traded at 56 British pence from 56.05 pence. It was almost unchanged at 81.67 Australian cents from 81.66 cents.