The New Zealand dollar held gains in Northern Hemisphere trading as better than expected US house sales and upbeat first-quarter earnings stoked investors' appetite for bigger returns.

The kiwi was little changed at 81.55 US cents at 9am from 81.60 cents yesterday. The trade-weighted index slipped to 72.45 from 72.57 yesterday.

Stocks on Wall Street rallied with the Standard & Poor's 500 index up 0.7 per cent to 1399.98 after pending US home sales rose to their highest level in two years, and corporate earnings continued to beat expectations. Of the 254 companies in the S&P 500 that have reported so far, more than 72 per cent have exceeded forecasts, according to Thomson Reuters data. That's stoked investors' appetite for risk sensitive assets, such as the kiwi dollar.

"The USD index traded with a general downward bias during the evening, as the stabilisation in market sentiment saw reduced demand for the 'safe haven' currency," BNZ strategist Kymberly Martin said in a note.


The kiwi shrugged off jawboning by Reserve Bank Governor Alan Bollard yesterday, when he warned if the currency stays "strong without anything else changing, the bank would need to reassess the outlook for monetary policy settings."

Traders are now betting the central bank will cut 6 basis points from the OCR in the coming 12 months, according to the Overnight Index Swap curve. Because the RBNZ moves in 25 basis point lots, that means the market is giving Bollard an outside chance of cutting rates over that period.

"Continued strength in the NZD could lead the RBNZ to flatten its proposed rate trajectory, or even cut rates," Martin said.

Traders also ignored Finance Minister Bill English's warning that the government's books have deteriorated, with early budget estimates of an operating deficit of $670 million in the 2014/15 year, when the government pledged to get the books back in the black.

English reaffirmed the government's commitment to reaching surplus, and said this year's zero budget will likely be followed by another year of little or no new spending in 2013.

The New Zealand Debt Management Office will hold its biggest auction in seven months today, when it tries to sell $900 million of debt. The DMO has a target of $13.5 billion of debt sales this fiscal year but has slipped behind the run rate needed to meet that total by June 30.

Martin said demand "should be supported by the continued spread of NZ bond yields to offshore equivalents."

No local data is scheduled for today, and investors will be looking for any suggestion of more quantitative easing when the Bank of Japan reviews monetary policy today.

The kiwi fell to 66.04 yen from 66.20 yen yesterday, and declined to 78.43 Australian cents from 78.68 cents. It was little changed at 61.60 euro cents from 61.67 cents yesterday, and slipped to 51.35 pence from 50.44 pence.