NZ dollar holds near 3-month high after IMF downgrades forecasts

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The New Zealand dollar held near a three-month high against the greenback as the International Monetary Fund cut its forecast for global economic growth and European Union finance ministers rejected Greece's debt swap deal, sapping investors' appetite for higher-yielding, or riskier, assets.

The New Zealand dollar rose to 81.03 cents just before 8.30am from 80.86 cents at 5pm yesterday. The kiwi fell to 62.18 euro cents from 62.25 cents.

Investors were wary after the IMF downgraded its global growth forecast for 2012 to 3.3 percent from 4 percent, as Europe slips further into a recession and growth cools in China and India. Global growth in 2013 is now expected to be 3.9 percent, down from 4.5 percent.

European Union finance minister meeting in Brussels called on bondholders to provide greater debt relief for Greece, spurring concern the nation may fail to meet its March 20 bond payment, which added to downbeat sentiment. The Greek government now hopes to conclude talks with private creditors by Feb. 1, in an agreement that will hopefully see the nation avoid default.

"This sort of environment is a recipe for a mild kiwi weakness,'' said Mike Jones, market strategist at Bank of New Zealand. "There is any number of headlines to choose from, with a mixed session overnight.''

Federal Reserve policymakers will meet on Wednesday in the US for the first time this year, and the Federal Open Market Committee will release its monetary policy statement. The Fed is expected to continue pursuing a near-zero interest policy, and will include Federal funds rate forecasts for the first time.

"This is going to be even harder to read - market tension is firmly focused on that,'' Jones said,

The US continues a heavy data week, with pending home sales, an initial reading on fourth-quarter growth, and January consumer sentiment all set for release.

Australia's consumer price index is due today, and analysts predict it will stay in the upper end of the Reserve Bank of Australia target band at 2.7 percent.

Markets across the Tasman will close tomorrow for Australia day, while Chinese markets remain closed.

A data heavy end to week kicks off in New Zealand today, with Reserve Bank credit card spending for December set for release this morning, the Official Cash Rate review on Thursday, followed by the BNZ-Business NZ Performance of Manufacturing Index on Thursday afternoon and December balance of trade statistics on Friday.

The New Zealand dollar advanced to 77.35 Australian cents from 77.10 cents and rose to 63.01 yen from 62.26 yen. It fell to 51.93 British Pence from 52.03 pence yesterday.

The trade-weighted index rose to 71.9 from 71.67.