The New Zealand dollar hit a new five-year high against its Australian counterpart as a higher forecast milk price by Fonterra and optimistic local businesses show a growing contrast in the fortunes of the trans-Tasman economies.
The kiwi rose as high as 88.40 Australian cents, trading at 88.30 cents at 5pm from 87.96 cents on Tuesday.
The NZ currency was little changed at 79.77 US cents at 5pm in Wellington from 79.74 cents at 8am, down from 79.92 cents on Tuesday.
Fonterra raised its forecast payout to farmers for the 2014 season by 50 cents to $7.50 per kilogram of milksolids amid slow global supply and a weaker kiwi dollar, fuelling optimism for New Zealand's biggest export.
Meantime, the ANZ Business Outlook showed firms' confidence at a 14-year high on the strength of optimism in the building sector.
That shows the growing divergence between the New Zealand and Australian economies, with interest rates expected to start rising on this side of the Tasman and another rate cut anticipated in for Australia.
"Most of the attention was on the relentless upward march of the kiwi/Aussie cross," said Mike Jones, currency strategist at Bank of New Zealand in Wellington.
"Fonterra's upward revision to its milk price, and the upbeat ANZ Business Confidence survey only added fuel to the fire, and a test of 90 Australian cents now looks probable."
The NZ dollar slipped to 78.20 yen from 78.58 yen on Tuesday and to 60.16 euro cents from 60.28 cents.
It traded at 75.49 on the trade-weighted index from 75.55.
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