By Matt Townsend Oct. 21 (Bloomberg) -- The euro climbed above $1.50 for the first time in 14 months on optimism the global economic recovery is gathering momentum, increasing demand for riskier assets. Sterling rose to a five-week high after Bank of England Governor Mervyn King wrote in a newspaper opinion piece that “it would be wise” to take into account the prospect of higher interest rates. New Zealand’s dollar climbed to the strongest level since July 2008 as Reserve Bank Governor Alan Bollard said currency strength won’t forestall higher borrowing costs. “The Fed is a possible candidate of being the last to raise rates,” said Matthew Strauss, a senior currency strategist in Toronto at RBC Capital Markets Inc., a unit of Canada’s biggest bank by assets. “Divergence will be the key driver for currencies.” The 16-nation euro increased 0.3 percent to $1.4984 at 10 a.m. in New York, from $1.4945 yesterday. It touched $1.5003, the highest level since August 2008. Interest rates will have to rise “at some point,” King wrote in an opinion piece published today by the Herald newspaper of Scotland. The Bank of England’s Monetary Policy Committee voted 9-0 to keep the main rate and its 175 billion pound ($286 billion) asset-purchase program unchanged at its Oct. 8 meeting, minutes showed today. The New Zealand dollar erased losses after Radio New Zealand reported that Bollard told lawmakers the currency’s gains are being driven by a weak U.S. dollar and money markets. As recently as Sept. 10, he said he didn’t expect to raise interest rates until “the latter part of 2010.” Rate View “Bollard’s comments have led to more intense speculation about when the RBNZ will start hiking rates, and have opened the way for more currency gains,” said Sonja Marten, a currency strategist in Frankfurt at DZ Bank AG. The Australian and New Zealand dollars gained 3.8 percent and 2.7 percent, respectively, versus their U.S. counterpart since Oct. 6, when the Reserve Bank of Australia lifted its cash target by a quarter-percentage point to 3.25 percent, becoming the first central bank among the Group of 20 to raise interest rates since the financial crisis began. A “very expansionary setting of policy was no longer necessary, and possibly imprudent,” minutes of this month’s Australian policy meeting showed yesterday. The Dollar Index, which IntercontinentalExchange Inc. uses to track the currency against the euro, yen, Swiss franc, pound, Swedish krona and Canadian dollar, fell 0.5 percent to 75.228, after earlier sliding to 75.322. It dropped yesterday to 75.103, the lowest level since August 2008.

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