The New Zealand dollar advanced as investors pulled back expectations for the Federal Reserve to signal a rise in interest rates at this week's meeting and on reports China is adding liquidity to its banks to bolster economic growth.
The kiwi rose to 81.97 US cents at 8am in Wellington, from 81.61 cents at 5pm yesterday. The trade-weighted index gained to 78.57 from 78.47 yesterday.
The US dollar index, which measures the greenback against a basket of currencies, declined after the Wall Street Journal Fed commentator Jon Hilsenrath speculated the central bank would maintain its pledge to keep interest rates low for a 'considerable time' in its policy statement scheduled for release tomorrow morning New Zealand time, prompting some investors to pull back their expectations that the phrase could be dropped.
Also weighing on the greenback and strengthening the kiwi, news website Sina.com reported China is providing 500 billion yuan of liquidity to the country's five biggest banks, in a move to stimulate the economy and bolster growth to achieve the country's 7.5 percent growth target this year. China is New Zealand's largest trading partner.
"Everything basically went up against the US dollar so the US dollar got clobbered overnight from those two pieces of news," said Imre Speizer, senior market strategist at Westpac Banking Corp in New Zealand.
