The New Zealand dollar rose after minutes from the Federal Reserve's June meeting suggested a third round of quantitative easing has not been entirely ruled out for the U.S. economy, lifting appetite for growth assets.
The prospect of another round of asset buying by the Fed managed to push concernsover the ongoing Euro debt crisis into the background temporarily, helping boost demand for commodities and commodity-linked currencies such as the kiwi and Australian dollar.
The Thompson Reuters Jefferies CRB Index, a measure 19 hard and soft commodities, rose 1.1 per cent to 344.26, snapping a four day streak of declines.
Global equities fell in the offshore session, although the rise in risk appetite on the back of the QE3 hopes helped lift the exchanges off their intraday lows. On Wall Street, the Standard & Poor's 500 Index fell 0.4 per cent to 1,313.75, while Europe's Stoxx 600 fell 0.6 per cent to 268.16.
"The New Zealand dollar suffered a bout of uncertainty yesterday and overnight as global markets readjusted further on European concerns," said Alex Sinton, a senior dealer at ANZ New Zealand.
"Dips overnight were met with appropriate levels of demand ensuring that it lifted from the lows."
The kiwi recently traded at 82.03 U.S. cents, up from 81.14 cents
yesterday, and rose to 71.27 on the trade-weighted index of major trading partners' currencies from 71.08.
It rose to 77.22 Australian cents from 77.05 cents yesterday, and was little changed at 65.13 yen from 65.17 yen.
It rose to 58.62 euro cents from 58.49 cents yesterday, and gained to 51.49 pence from 51.39 pence previously.
Europe's unfolding debt crisis again saw the single currency under pressure again, falling to a four month low against the greenback, after a bid by officials to soothe market debt fears failed to gain traction after Moody's Investor Service cut Ireland credit rating to junk.
The country's credit rating is now Ba1 from Baa3 and was kept on negative outlook.
The kiwi may trade between a range of 81.50 US cents and 82.25 cents, according to Sinton.
