The New Zealand dollar took the announcement of the nation's move out of lockdown in its stride after being buoyed all day by positive sentiment in equities markets.

The kiwi was trading at 61.42 US cents at 5pm in Wellington, from 61.36 cents at the New York close on Friday and 61.18 cents here on Friday. The trade-weighted index was at 69.24 from 68.99 Friday.

Prime Minister Jacinda Ardern announced New Zealand will be moving from the current level 3 restrictions to level 2 from midnight on Wednesday, which means that retail stores, malls, cafes and restaurants, cinemas and other public spaces can reopen for the first time since March 26. All such venues will still require social distancing, meaning they won't be able to operate at full capacity.

"There's been a minimally positive reaction, probably because so many people have been expecting this," said Hamish Pepper, fixed income and currency strategist at Harbour Asset Management.


"I think the real surprise today would've been if we didn't come out of level 3, and then there would've been a negative reaction. I think this has just met expectations," Pepper said.

That's because new cases of infection have increased by between zero and three each day since May 3. The three new cases today, two linked to a rest-home which produced a cluster of infections and one traveller, brought New Zealand's total infections to 1,497. Deaths have remained at 21 since May 6.

The US futures market is pointing to another day of gains for US stocks following a positive session on Friday.

"It's as simple as it gets. We're in one of these windows where the currency is essentially a barometer of sentiment. Equities have been rising and so has the kiwi dollar," Pepper said.

"This week has the potential to change that dynamic with the Reserve Bank" releasing its monetary policy statement on Wednesday afternoon.

"We could move back to thinking much more about interest rate differentials. For example, should we see a nod to negative interest rates or just the prospect of a lower official cash rate, that could promote lower short-term interest rates as well as a weaker currency," Pepper said.

The central bank is expected to announced an increase in its bond buying, or quantitative easing programme, the technical name for what is in effect money printing.

On Thursday, the government will release its 2020 budget but Pepper said it will be a complex document of the kind that the currency market tends to find it difficult to digest and react to, at least in the immediate aftermath.


Nevertheless, the market is expecting the government to announce a further $20 billion or so of spending to cushion the impact of the coronavirus crisis on the economy and that will also point to how much it will have to raise through bond sales.

Pepper said the market would also be looking at Treasury's economic forecasts. "We will get a better sense of what a base case looks like," he said.

"The number of moving parts makes it a difficult event for currency markets to respond to, or at least difficult to respond to quickly."

The New Zealand dollar was trading at 93.71 Australian cents from 93.65 cents at 5pm on Friday. It was at 49.42 British pence from 48.39 pence, at 56.61 euro cents from 56.41 cents, at 65.70 yen from 65.10 yen and at 4.3508 Chinese yuan from 4.3279 yuan.

The bid price on the two-year swap rate closed at 0.1500 per cent from 0.1600 per cent on Friday. The 10-year swaps were at 0.7125 per cent from 0.7025 per cent.