Dollar surges on New Zealand investment news

THE dollar was almost half a US cent higher after news of an planned influx of Chinese investment into New Zealand improved market sentiment.

THE dollar was almost half a US cent higher after news of an planned influx of Chinese investment into New Zealand improved market sentiment.

At 7am (AEST) today, the Australian dollar was trading at 106.45 US cents, up from 105.92 cents yesterday.

Since 5pm (AEST) yesterday, the local unit traded between 105.69 US cents and 106.47 cents.

Yesterday, it was reported that China's state-owned wealth fund, the China Investment Corp, may have set aside $US6 billion ($5.7 billion) to invest in New Zealand assets.

The New Zealand dollar surged to a three-year high against the US dollar on the news and peaked at a 15-week high against its Australian counterpart of 76.50 Australian cents.

HiFX trading director Mike Hollows said the the Chinese investment news boosted market optimism and encouraged currency traders to move in to risk assets, such as the Australian dollar and the euro.

"We've had a pretty solid run aided by an improvement in the fortunes of the euro, and to some degree the kiwi dollar, which had big day yesterday," Mr Hollows said from Auckland.

"Rumours of impending Chinese investment into the antipodeans caught the market a little bit short.

"So the Australian dollar is just consolidating, more than anything, but it looks like the downside risk has abated."

Mr Hollows said he expected the currency markets to be quiet  tonight (AEST) ahead of the US memorial day public holiday and a UK bank holiday, both on Monday.

He expected the Australian dollar to trade in a range between 106.00 US cents and 106.70 cent during the local session today.