The New Zealand dollar rose as China doubled the yuan's trading band, signalling a move toward a more convertible currency and stoking demand for currencies that trade with the world's most populous nation.
The kiwi rose to 82.48 US cents from 82.33 cents at the close of trading in New
York on Friday. New Zealand's currency gained to 5.1945 yuan from 5.1788 last week.
Policymakers in China, New Zealand's second-largest export market, pledged a five-year plan to loosen currency controls as Premier Wen Jiabao targets higher domestic consumption and an enlarged global role for the yuan.
This is the first time China has widened its trading band against the greenback since 2007. That means China will have to reduce its cash and government bond reserves, and is expected to increase buying of trading partner currencies, such as the kiwi and Australian dollars.
"Although China prefers a weak currency, it also desires that the yuan should become a major world currency," said Alex Sinton, senior dealer at ANZ New Zealand. "The topside cap for the kiwi is just coming down from its close in New York - I would be surprised if we were to push into the 83 territory."
