Pitfalls aplenty in strong dollar 

The Kiwi dollar has soared to new highs, giving consumers more buying power, but stripping millions of dollars from industries' livelihood.

The dollar surged to a 22-year high on Monday as stronger than expected inflation data boosted the chances of a Reserve Bank interest rate rise next week.

The Kiwi dollar peaked at 79.3 US cents, its highest ever since the currency was floated in 1985, after second-quarter consumer prices rose 1%, which was faster than both market and Reserve Bank forecasts, prompting market opinion to change and favour a further rate hike to 8.25%.

Finance Minister Michael Cullen has attempted to downplay the dollar's value by issuing a warning to international money markets that the dollar may fall.

"For those people pushing money into New Zealand dollar have to realise that a correction will occur at some point and they're opposed to risk around that," he says.

Caught in the net of the rising Kiwi dollar is the seafood sector which loses $20 million of income every time the New Zealand dollar goes up by one US cent. 

"We've lost in the course of this week alone 40 or so million dollars, that's like two oyster fisheries or one hake fishery being taken out of the industry," says Seafood Industry Council spokesperson Alistair McFarlane.

Similarly, every cent the Kiwi goes up wipes out $85 million of income for sheep farmers.

The consumers are, for the most part, the winners in the strong dollar.

"All consumers have been effectively delivered a wage increase. Our dollars go further because imports are cheaper," says Westpac Chief Economist Brendan O'Donovan.

One reason the dollar is getting so high is because the Reserve Bank is expected to hike the Official Cash Rate again next week. Some experts say the lowest mortgage rate in a few months could be 9.5%.

"If you're a heavily indebted consumer you're going to be squealing from high interest rates, if you're an exporter not benefiting from high international prices you're going to be begging for mercy," says O'Donovan.

Relief will only come if the central bank is successful in cooling down New Zealand's passion for property.

"The next step beyond that is a slower economy probably equals a lower New Zealand dollar," says AMP Capital Strategist Leo Krippner.

However, the Wellington Chamber of Commerce wants the government to slow down its spending in a bid to control inflation after the consumer price index data.

Charles Finny of the chamber says a lot of blame is being placed on oil prices and the housing market for the high dollar, but he says there are many other causes as well, including increased government expenditure.

Finny says the chamber supports government spending but at a much lower rate.