The New Zealand dollar climbed back above 77 US cents as food inflation fears prompted investors to seek out commodity-linked currencies.

Traders sought out the Australian, Canadian and New Zealand dollars, known as commodity currencies, as rising food prices keep investors looking for exposure in nations that produce raw materials, even as the price of so-called hard commodities, such as oil and coal, declined.

That comes ahead of Fonterra's second online auction of 2011 on Tuesday in the US, which will probably show another increase in the price of milk powder amid a declining global supply. Martin Luther King Jr. Day in the US kept trading thin with Wall Street on holiday.

"People are hitting on the food inflation and soft commodity theme in the current environment where there's not a lot of direction," said Khoon Goh, head of market economics and strategy at ANZ New Zealand.

"The kiwi dollar was definitely the outperformer on the G10 currencies" and attracted "solid demand," he said.

The kiwi rose to 77.22 US cents from 76.77 cents yesterday, and advanced to 69.47 on the trade-weighted index of major trading partners' currencies from 69.19.

It increased to 63.85 yen from 63.68 yen yesterday, and was little changed at 77.63 Australian cents from 77.68 cents. It climbed to 58.10 euro cents from 57.70 cents yesterday, and gained to 48.62 pence from 48.43 pence.

Goh said the currency may trade between 76.95 U.S. cents and
77.55 cents today, with Real Estate Institute house price data unlikely to move the market much.

The house data will probably show an improvement in both prices and sales, though the market has been in a slump over the past year, he said.

The euro was little changed at 1.3291 per US dollar from 1.3298 as European finance ministers meeting Brussels continues today.
Investors are looking for the policy makers to reach some agreement on lifting the region's bail-out fund and expand its mandate to buy government bonds on the periphery of the Euro-zone.

A group of American senators are calling for the Republican-controlled House of Representatives to pass legislation imposing duties on Chinese imports to offset the undervalued yuan. The kiwi dollar recently traded at 5.0884 yuan from 5.0593 yuan yesterday.