NZ dollar rallies on optimism for Greek outcome

File photo

The New Zealand dollar rose more than half a US cent as optimism that Greece will pass its austerity package drove global equities higher for a second day.

On Wall Street, stocks rose ahead of the crucial vote with the Standard & Poor's 500 Index gaining 1.3 per cent to 1,296.67, while Europe's Stoxx 600 rose 0.55 to 265.23.

That spurred demand for growth linked currencies such as the New Zealand and Australian dollar.

Sentiment was bolstered by signs of further progress on a second bailout for the heavily indebted country, after German banks agreed in principle to use a French proposal as the basis for engaging with private bondholders on a possible Greek debt rollover.

The kiwi also received support from stabilising commodities, with oil prices starting to track upwards after the release of emergency supplies saw prices fall almost 8 per cent last week.

The Thompson Reuters Jefferies CRB Index, a measure of 19 hard and soft commodities, rose 1.7 per cent to 334.46.

"It certainly seems a case of buying the rumour and selling the fact, with the market frontloading ahead of the vote," said Sam Coxhead, a currency adviser at www.DirectFX.co.nz.

"The market has also been buoyed by the French initiative involving banks in rolling over European debt, which is seen as a failsafe should the vote fail."

The kiwi recently traded at 81.09 US cents, up from 80.50 cents yesterday, and gained to 70.28 on the trade-weighted index of major trading partners' currencies from 69.95.

It rose to 77 Australian cents from 76.95 cents yesterday, and gained to 65.78 yen from 65.03 yen.

It rose to 56.48 euro cents from 56.36 cents yesterday, and climbed to 50.71 pence from 50.48 pence previously.

The decline in US home prices continued to level off in April, with the S&P/Case-Schiller composite index of single-family home prices falling 0.1 per cent compared to the previous month, short of the 0.2 per cent expected.

The kiwi may trade between a range of 80.50 US cents and 81.50 cents, Coxhead said.