The New Zealand dollar rose after the US Federal Reserve held off raising interest rates while keeping alive the possibility of a hike later this year, the Bank of Japan changed its policy focus to longer-term rates, and ahead of this morning's Reserve Bank policy review.

The kiwi gained to 73.56 US cents at 8am in Wellington from 72.85 cents yesterday. The trade-weighted index advanced to 78.09 from 77.79.

The Federal Open Market Committee kept the federal funds rate unchanged while saying the case for an increase has strengthened and indicating an increase was on the cards later this year. That followed the Bank of Japan's review yesterday which scrapped a base money target and shifted the focus of its asset-purchase programme to long-term rates.

Traders are awaiting New Zealand's Reserve Bank review which is expected to keep the official cash rate at 2.5 percent, while retaining a bias for a reduction later this year.


"It would be a big surprise for the market were the RBNZ to cut the OCR today, given the strong recent data flow on the economy and labour market, and bounce in dairy prices," ANZ Bank New Zealand senior economic Sharon Zollner said in a note.

"The NZD wobbled on the BoJ and Fed but is much where it was 24 hours ago. Markets are fairly united on what the RBNZ will likely do and say this morning, which can set the scene for large moves on any surprises."

The local currency was almost unchanged at 73.83 yen from 73.80 yen after yesterday's Bank of Japan announcement, which some traders said looked like the reverse of the Fed's 'Operation Twist' in 2011, when the US central bank used the proceeds from sales of short-term Treasury bills to buy long-term Treasury notes to drive down long-term interest rates.

See live rates for the NZ-US $ below. Click for more information:NzForex Foreign Exchange Transfers

Fonterra Cooperative Group, New Zealand's biggest company and dominant player in the country's key dairy export sector, will announce its annual earnings today, having lifted its forecast payout to farmers 50 cents to $5.25 per kilogram of milk solids yesterday.

The kiwi traded at 96.41 Australian cents from 96.59 cents yesterday and rose to 4.9054 Chinese yuan from 4.8606 yuan. It rose to 65.60 euro cents from 65.44 cents yesterday and increased to 56.41 British pence from 56.16 pence.