NZ dollar sits near 2-month high

The New Zealand dollar held near a two-month high after European leaders pledged to provide aid for the region's banks, spurring optimism that policymakers may be closer to resolving the euro-zone's debt crisis.

The New Zealand dollar traded at 80.08 US cents just before 8am this morning, little changed from 80.11 cents at the close of trading in New York on Friday and up from 79.33 cents at 5pm on Friday in New Zealand. The trade-weighted index was little changed on 72.15 from 72.24.

Global share markets have warmed to European leaders' decision to drop the requirement that governments get preferred creditor status on Spain's banks. The Standard & Poor's 500 Index rose 2.5 per cent on Friday and Germany's DAX 30 surged 4.3 per cent. Higher-yielding currencies such as the kiwi surged alongside stocks on an increased appetite for risk.

"Risk appetite is set to remain this week," said Mike Jones, market strategist at Bank of New Zealand. "The rally on the European relief seems to have some legs."

"The chances are that the kiwi will push up to around 81 US cents this week - we look set to have another solid week for the kiwi," he said.

Jones said the New Zealand dollar is likely to finish the week higher, trading in a range of 79.50 cents to 81.50 cents.

EU finance ministers will enact the deal on loans to Spanish banks at a meeting on July 9.

China, New Zealand's second-largest export market, released its performance manufacturing index over the weekend, expanding at its weakest pace in seven months.

The index fell to 50.2 from 50.4 in May, according to government data.

In New Zealand, the Treasury's monthly economic indicators for June are due out this afternoon.

The New Zealand dollar fell to 63.12 euro cents from 63.25 cents at the close of trading in New York. The kiwi dropped to 77.94 Australian cents from 78.14 cents. It was little changed on 51.07 British pence from 50.95 pence and largely unchanged on 63.83 yen from 63.89 yen.