The New Zealand dollar rose more than one and a half US cents during the long holiday weekend as investors became more comfortable with risk-sensitive assets as global equity markets soared.

The kiwi dollar rose to 80.86 US cents at 8am from 79.17 cents at 5pm on Friday. That's the highest level since September 20.

A strong manufacturing report from China and a better-than-expected earnings result from Caterpillar helped stoke investor sentiment, with local optimism buoyed by New Zealand's Rugby World Cup victory during the weekend.

European leaders said after a weekend summit that good progress had been made and investors are now waiting for the outcome of a second summit on Wednesday. The eurozone is being urged to combine two proposals, an insurance model and a special purpose investment vehicle, Reuters reported.

Advertisement

"There is a general risk-on theme today," said Mike Burrowes, market strategist at Bank of New Zealand. "It seems to be on hopes that the EU is getting close to getting final detail together for a rescue package."

Uncertainties remain locally with Consumer Price Index data for the third quarter today, an interest rate decision by the Reserve Bank of New Zealand on Thursday and the pre-election economic and fiscal update today.

The pace of inflation slowed to 0.7 per cent in the third quarter for an annual rate of 4.7 per cent, according to a Reuters survey of 13 economists. That would be down from 1 per cent and 5.3 per cent respectively three months earlier.

The Reserve Bank, which is also picking 0.7 per cent inflation, is expected to keep the official cash rate at 2.5 per cent, highlighting the global risks while reiterating the potential for a future increase.

The New Zealand dollar eased to 77.11 Australian cents from 77.56 cents on Friday, and rose to 61.48 yen from 60.77 yen on Friday. It was little changed at 58.01 euro cents from 57.45 euro cents on Friday. It rose to 50.57 British pence from 50.11 pence.

The trade-weighted index rose to 70.09 from 69.39.