NZ dollar remains at near 7-week high

The New Zealand dollar held near a seven-week high after the Federal Reserve extended its stimulus measures less than some traders expected and ahead of figures expected to show a modest pickup in the local economy.

The New Zealand dollar traded at 79.59 US cents in volatile trading following the fed's statement, up from 79.49 cents at 5pm yesterday. The trade weighted index strengthened to 71.75 from 71.59.

Fed policymakers will expand their programme to replace short-term bonds with longer-term debt by $267 billion through the end of 2012.

The continuation of Operation Twist "should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative", the Federal Open Market Committee said in a statement, following a two-day meeting in Washington.

"The market had previously decided that the minimum they were expecting the fed to do was Operation Twist," said Stuart Ive, currency strategist at HiFX. "Now the market has decided it is not enough."

Fed policymakers now see 1.9 per cent-to-2.4 per cent growth in 2012 in the US, down from their April forecast of 2.4 per cent to 2.9 percent.

The New Zealand economy probably grew 0.5 per cent in the first three month of the year, based on a Reuters survey of 13 economists. That would continue the mild pick-up in growth after GDP rose 0.2 per cent and 0.3 per cent respectively in the final two quarters of 2011. The figures are released at 10:45 am in Wellington.

GPD could have a "bearing on the crosses but not the US dollar", Ive said. "Anything less than what the market is expecting will see a broad sell-off in the kiwi."

The New Zealand dollar was little changed on 62.62 euro cents from 62.71 cents after Antonis Samaras, head of Greece's New Democracy party, was sworn in as prime minister.

New Democracy will join forces with the socialist Pasok party, which finished third, and the sixth-place Democratic Left to hold 179 seats in the 300-member parliament.

The New Zealand dollar was little changed on 78 Australian cents from 78.04 cents at 8am. It was largely unchanged on 50.55 British pence from 50.56 pence. The kiwi rose to 63.17 yen from 62.69 yen.