NZ dollar rises ahead of OCR announcement

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The New Zealand dollar rose on a trade weighted basis ahead of the Reserve Bank's official cash rate review and monetary policy statement today, with the strength of the currency likely to be in the spotlight.

The Reserve Bank is expected to keep New Zealand's interest rate on hold at 2.5 per cent today, a sign the local economy is still in need to stimulus following the global financial crisis and the impact of the September and February earthquakes in Christchurch, although economic indicators have begun pointing to an improved outlook.

The high kiwi dollar is likely to be a focus for the bank with Governor Alan Bollard having previous flagged the surge in the currency as a major headwind to the local economic recovery.

The kiwi has gained 13.4 per cent since March 17, and last week reached a fresh post float high of 82.60 US cents, its highest level in 26 years.

Still, the currency's recent gains are set against rising inflationary pressures in the economy with CPI for the year to March at 4.5 per cent.

"I think Bollard will mention the currency but I don't think he will make too big an issue of it," said Sam Coxhead, a manager at DirectFX.co.nz.

"There is a school of thought out there that says Reserve Bank is appreciating the high currency to curb inflationary pressures."

The kiwi dollar recently traded at 81.47 US cents, little changed from 81.52 cents yesterday, and rose to 69.95 on the trade-weighted index of major trading partners' currencies from 69.83.

It rose to 76.72 Australian cents from 76.62 cents previously, and edged up to 65.13 yen from 65.08 yen.

It climbed to 55.91 euro cents from 55.59 cents yesterday, and slipped to 49.71 pence from 49.79 previously.In the offshore session leads for the currency were mixed, with global equities falling after US Federal Reserve chairman Ben Bernanke yesterday said the US economy still required stimulus to cope with a "frustratingly slow" recovery.

His comments added momentum to fears around the pace of global economic recovery, with the Standard & Poor's 500 Index falling 0.4 per cent to 1,279.55, while Europe's Stoxx 600 slipped 1.1 per cent to 269.01.

That was set against a rise in global commodity prices, with the Thompson Reuters Jefferies CRB Index, a measure of 19 soft and hard commodities, gaining 0.6 per cent to 348.46.

The kiwi is likely to trade between a range of 81 U.S. cents and 82.50 cents, Coxhead said, with the potential for volatility around the monetary policy statement high.