NZ dollar gains amid QE2 speculation

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The New Zealand dollar climbed back over 75 US cents as investors shunned the greenback amid reports the New York Federal Reserve will embark on further quantitative easing as soon as next week.

The Dollar Index, a measure of the greenback against a basket of currencies, fell 0.6 per cent to 77.29 after Bloomberg reported the New York Fed asked investors and dealers about their expectations for the size and length of what's been dubbed 'QE2'.

Fed officials have been mixed as to whether they'll support the second round of quantitative easing programme, and the survey, obtained by Bloomberg, is seen to have confirmed that it will happen next week.

The kiwi dollar was one of the strongest gainers in the New York session, after the Reserve Bank of New Zealand kept a tightening bias when holding the official cash rate at 3 per cent yesterday.

"The US dollar was sold off after reports the New York Fed surveyed primary dealers, mainly the banks, on QE2 and what size and impact they would expect from the announcement," said Mike Jones, strategist at Bank of New Zealand. "The kiwi's 74-to-75.50 US cents range is going to continue until the Fed meeting next week."

The kiwi rose to 75.39 US cents from 74.90 cents yesterday, and increased to 66.90 on the trade-weighted index of major trading partners' currencies from 66.74.

It gained to 61.10 yen from 60.97 yen yesterday, and advanced to 77.03 Australian cents from 76.68 cents. It was little changed at 54.11 euro cents from 54.12 cents yesterday, and slipped to 47.32 pence from 47.40 pence.

Jones said the currency may trade in a range of 74.90 US cents and 75.60 cents today with most of the day's event risk in the Northern Hemisphere time-zone. The first estimate of US third-quarter economic growth, Euro-zone inflation and the University of Michigan consumer confidence survey are among the due data releases.

New Zealand's September trade and building permits data out today aren't expected to impact on the kiwi, Jones said.