Kiwi above 78 US cents on prospect of Fed easing

BUSINESSDESK: The New Zealand dollar rose after weak US data fuelled speculation the Federal Reserve will take further steps to stoke the world's largest economy, helping underpin global growth.

The kiwi rose to 78.11 US cents just before 8am, the first time above 78 cents since May 11, from 77.74 cents at 5pm yesterday.

The trade weighted index increased to 70.83 from 70.64.

US consumer prices fell 0.3% in May, the biggest decline in more than three years, while initial jobless claims unexpectedly climbed by 6000 to 386,000.

That follows a string of weaker-than-expected US data boosting speculation the Fed could act as soon as next week when policymakers meet in Washington to review the US economy.

The Dow Jones Industrial Average rose 1.2%.

"The data has heightened the Q3 calls, giving support to stocks and the New Zealand dollar," said Stuart Ive, currency strategist at HiFX.

"We would initially see a bounce in the upside and a weaker US dollar but that will be temporary - it all depends on what the Fed decides to do."

The Federal Reserve Open Market Committee has previously pledged to keep interest rates low until at least the end of 2014. Committee members will gather just two days after Greece goes to the polls this weekend for the second time in six weeks.

Elections this Sunday will be closely watched by markets in the event voters elect a government that decides to leave the region's shared currency.

The New Zealand dollar rose to 62.04 yen from 61.74 yen yesterday before a Bank of Japan meeting today. The BOJ is not expected to announce any new initiatives after its left asset-purchases unchanged at its May meeting.

Reserve Bank governor Alan Bollard yesterday left New Zealand's official cash rate unchanged at the record-low 2.5% and flagged a slower track for interest rate increases.

New Zealand's BNZ-Business NZ performance manufacturing index and the ANZ Roy Morgan Consumer Confidence will be released today.

The New Zealand dollar rose to 61.92 euro cents from 61.77 cents yesterday at 5pm. The kiwi gained to 50.29 British pence from 50.06 pence.

It was little changed on 78.12 Australian cents from 78.03 cents.