The New Zealand dollar jumped to its highest in more than two weeks against the British pound after the Bank of England cut interest rates and delivered a bigger stimulus package than the market expected.

The kiwi rose as high as 54.87 pence, trading at 54.69 pence at 8am in Wellington from 53.77 pence yesterday. It edged up to 71.78 US cents from 71.69 cents yesterday.

The Bank of England cut the bank rate a quarter point to a new record low 0.25 percent and said it would buy up to 10 billion pounds of UK corporate debt and expand its asset purchase programme of UK government bonds by 60 billion pounds.

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Investors had expected the interest rate cut, but the size of new quantitative easing took them by surprise, pushing the sterling down 1.6 percent and triggering a 1.6 percent rally in UK stocks.

New Zealand's currency has been bolstered by the relatively high yield on offer, and the Reserve Bank of New Zealand is expected to cut the official cash rate a quarter point to 2 percent next week as the strong kiwi and cheap oil continue to push down consumer prices, with inflation tracking below the central bank's target.


"The BoE's actions will no doubt add to the low global interest rate complex and further support the hunt for yield," ANZ Bank New Zealand chief economist Cameron Bagrie said in a note. "As such, higher yielding markets, including NZ, should continue to benefit, which leaves the RBNZ in tight spot of playing catch-up and easing further in an environment of good growth and rapidly rising credit growth, but no inflation."

Investors are awaiting US non-farm payrolls on Friday in Washington which are expected to show the world's biggest economy added 180,000 jobs last month. The labour market is a key factor for the Federal Reserve's decision on when to raise interest rates again, though expectations were tempered last week by disappointing second-quarter gross domestic product data.

The local currency was little changed at 94.01 Australian cents from 94.18 cents yesterday and unchanged at 72.63 yen. It gained to 64.48 euro cents from 64.28 cents yesterday and increased to 4.7640 Chinese yuan from 4.7564 yuan. The trade-weighted index was little changed at 76.18 from 76.05.