NZ dollar hits 7-week high on Fed rumours

The New Zealand dollar rose to a seven-week high against the greenback amid speculation the Federal Reserve may announce fresh stimulus measures to boost the world's largest economy.

The New Zealand dollar rose to 79.75 US cents just before 8am from 77.31 cents yesterday at 5pm. That's the highest the currency has traded since May 3. The trade weighted index increased to 71.80 from 71.63.

The Federal Open Market Committee meet on Wednesday in Washington, where markets are expecting the central bank will add more stimulus to the US economy. Policymakers are expected to provide fresh details of efforts to speed up the pace of recovery in the world's largest economy, after a string of weaker-than-expected data.

An extension to "Operation Twist" is seen as the most likely option, where the Fed sells short-term government debt in order to buy longer-dated securities.

The New Zealand dollar's gains are "all based on the hope that the Federal Reserve will come up with the answers," said Alex Sinton, senior dealer at ANZ New Zealand. "I wouldn't be surprised if we see the kiwi suffering after the FMOC tomorrow."

US job openings fell 325,000 to 3.42 million, the lowest level since November, according to Labor Department data as Fed policymakers enter their two-day meeting.

Earlier this year the Fed pledged to keep interest rates low until at least the end of 2014.

The kiwi was little changed at 62.89 euro cents from 62.87 cents amid speculation European policymakers will ease the terms of Greece's 240 billion euro bailout package. Greek elections reduced the immediate risk of a euro-zone break up, with pro-austerity parties New Democracy and Pasok securing 162 seats in the 300-seat Parliament.

At a leaders' summit of the Group of 20 nations in Mexico, US President Barack Obama and German Chancellor Angela Merkel faced pressure from leaders to do more to stem the crisis. G20 leaders are now meeting for a second consecutive summit, with talks dominated by Europe's debt woes.

Whole milk prices at this morning's GlobalDairyTrade auction rose, even as overall prices for dairy products slipped 0.5 per cent compared to the last sale in early June, when the index rebounded from a three-year low.

New Zealand's March quarter's balance of payments is release today by Statistics New Zealand. That's followed by the March quarter's gross domestic product on Thursday and International Travel and Migration for May on Friday.

The New Zealand dollar was little changed at 78.26 Australian cents from 78.22 cents yesterday. The kiwi increased to 62.95 yen from 62.67 yen yesterday, and rose to 50.70 from pence from 50.55 pence.