Wellington, Sept 17 NZPA - Analsyts are starting to ask if the Reserve Bank of New Zealand (RBNZ) will intervene to knock the high NZ dollar down but conclude it is unlikely.

While a business leader today argued there wass no easy fix to the high currency, which reduced returns to exporters at a time when the economy was emerging from recession.

The NZ dollar was the best performing currency in the world in the past six months against a weak greenback, and is strong on a range of cross rates. Currency analysts expect it to rise further.

This raises the question of whether the rise is exceptional enough to warrant intervention.

"We don't believe the RBNZ will intervene at the current level," said Imre Speizer, Westpac's senior market strategist, in a report.

The report notes that from 2005 the central bank was allowed to trim peaks and troughs in medium-term fluctuations in the NZ dollar, and in 2007 changes to foreign currrency reserves were announced that provided some flexibility.

The exchange rate must be exceptionally high, or low, and not supported by economic fundamentals. Intervention must be consistent with the policy targets agreement and conditions in the market must be opportune.

In 2007, $2.2 billion was sold and in 2006 $1.6 billion was sold in two major episodes of intervention.

In 2004, the RBNZ received a $1 billion capital injection to cover the risk of losses and assuming a 10 percent loss tolerence it could in theory spend $10 billion on intervention, according to the Westpac report.

Mr Speizer said the RBNZ has accepted that recent NZ dollar strength was due to an improvement in global risk sentiment, which has driven the US dollar lower. Illiquidity has also been an issue.

"These factors are outside the RBNZ's influence," Mr Spezier said.

The post-float average of the trade weight index is 60.80, and the index was today at 64.80.

Business New Zealand chief executive Phil O'Reilly said in the Independent newspaper today that there was no easy fix to exchange rate volatility.

A floating currency was preferrable to a fixed or pegged rate because the currency could respond quickly to external shocks. In Singapore, the central bank bought and sold currency to keep it stable.

"But to do that we would need to buy huge currency reserves, more than our economy could afford," Mr O'Reilly said.

The NZ dollar has risen to US71.57c from under US50c in March and it is at A81.59c against the Australian dollar.

Westpac disagrees with the RBNZ that gains against the Australian dollar are at odds with relative economic developments.

New Zealand's GDP was no longer under-performing Australia's by such a wide margin and forecasts are similar for future growth.

Overall, economic conditions still favoured Australia over New Zealand.

"The difference between New Zealand's and Australia's propsects has turned out smaller than markets expected," Westpac said.