NZ dollar rallies ahead of Budget

The New Zealand dollar may trade in a range of 85 US cents and 86 cents today. Photo / File

The New Zealand dollar strengthened against major currencies as investors take advantage of a dip in the kiwi to buy ahead of the government budget today.

The kiwi rose to 82.36 US cents from 82.13 cents at 5 pm yesterday. The trade-weighted index gained to 77.48 from 77.13 yesterday.

New Zealand's currency has been trading under 82 US cents this week as investors supported the greenback on the expectations the world's largest economy is on the mend. New Zealand's government is today expected to say the country will post a surplus in the 2015 financial year, which will help support the currency. Details of the budget are released at 2pm in Wellington.

"It's just a little bit of profit taking," said Michael Johnston, senior dealer at HiFX. "We have fallen a long way in a short space of time. There is a bit of a rally higher."

The outlook for the US economy remains upbeat, even as data yesterday fell short of expectations. Manufacturing in the New York region posted a surprise contraction last month, while a separate report showed a bigger-than-expected decline in US industrial production in April.

"US dollar risk continued to weaken," Johnston said.

Domestic data accounted for only about 30 per cent of the New Zealand currency's movement, with overseas factors dominating, Johnston said.

"We will continue to see the US dollar show good form going forward, which will weigh heavily on the kiwi", he said.

The New Zealand dollar edged up to 83.18 Australian cents from 83.01 yesterday and rose to 84.21 yen from 83.90 yen. It increased to 63.92 euro cents from 63.49 cents and gained to 54.02 British pence from 53.92 pence.