Kiwi moves upward as Fed minutes renew prospects of QE3

BUSINESSDESK: The New Zealand dollar pared losses in local trading as tremors over Greece's potential exit from the euro-zone settled down and the latest US Federal Reserve meeting minutes showed policymakers may be prepared to further stimulate the economy.

The kiwi rose to 76.66 US cents at 5pm from 76.30 cents at 8am, and 76.48 cents yesterday.

The trade weighted index was little changed at 69.44 from 69.47 yesterday.

Investor nerves settled down in the local trading session as fears over Greece's potential exit from the euro zone faded as the Mediterranean nation prepares to go back to the polls next month.

The minutes for last month's Federal Open Market Committee meeting showed policy makers acknowledged a loss of momentum in US growth could warrant a third round of quantitative easing.

"The fact that more members are chatting about QE3 maybe makes people get a little more focused on the US economy rather than buying the US dollar because it's not the euro," said Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney.

"There's a chance that with no new information [out of Greece] for a month volatility will quieten down, and if that's the case, the Australian and New Zealand dollars won't be under quite so much pressure," he said.

Investors will be watching the Spanish government's bond auction early today, where it will seek to raise 2.5 billion euros of debt maturing in 2015 and 2016.

The yield on Spain's benchmark 10-year government bond rose 3 basis points to 6.29%.

Japan's economy grew at an annual pace of 4.1% in 2011, beating economists' forecasts.

That helped underpin the improving investor sentiment in the Asian trading session, with stock markets up across most of the region.

Japan's Nikkei 225 rose 0.8% and Hong Kong's Hang Seng index gained 0.5% in afternoon trading.

The kiwi rose to 61.54 yen from 60.21 yen yesterday, and fell to 77.03 Australian cents from 77.23 cents.

It was little changed at 60.17 euro cents from 60.21 cents yesterday, and rose to 48.17 pence from 47.94 pence.