NZ dollar rises to 3-year high

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The New Zealand dollar rose to a fresh three-year high after the US Federal Reserve's decision to keep rates on hold and the US$600 billion bond purchase programme in place saw investors continue to bet against the US currency.

On Thursday last week at the Federal Open Market Committee meeting, Fed chairman Ben Bernanke delivered a dovish assessment of the US economy, sparking fresh fears that the recovery in the world's biggest economy may be losing traction as the QE2 stimulus nears its end.

That saw traders short the US dollar even further, and saw the kiwi rise to 80.99 cents, its highest level March 2008, before paring back in late New York trade last week.

"The market got the clear message that the US central bank is going to be the last developed country to hike interest rates," said Khoon Goh, head of market economics and strategy at ANZ New Zealand.

"With currency markets continuing to trade off yield differentials at the moment, commodity currencies (such as the Australian and New Zealand dollar) are still in vogue."

The kiwi recently traded at 80.91 US cents from 80.32 cents on Friday, and climbed to 68.75 on the trade-weighted index of major trading partners' currencies from 68.36. It gained to 73.70 Australian cents from 73.56 cents last week, and rose to 65.71 yen from 65.49 yen.

It climbed to 54.61 euro cents from 54.15 cents on Friday, and rose to 48.40 pence from 48.21 pence previously.

The New Zealand dollar also drew support from the Australian dollar, which flirted with the $1.10 level ahead of Reserve Bank of Australia's rate review tomorrow. Governor Glenn Stevens is expected to leave interest rates on hold at 4.75 per cent, the highest in the developed world, which could provide a further boost the currency.

Commodity prices continued to track upwards, boosted by steady demand and weaker U.S. dollar. The Thompson Reuters Jefferies CRB Index, a broad measure of 19 commodities, rose 1.2 per cent to 370.56, its highest level since March 2008.

The kiwi may trade between 80.55 US cents and 81.50 cents, Goh said.