NZ dollar posts modest gains

The New Zealand dollar made modest gains against the euro and fell against the yen overnight, with the European currency weighed down by a lack of concrete progress on a financial aid package for debt-strapped Greece.

Concerns about further tightening by Chinese monetary authorities also stoked worries about a global recovery, denting investors' appetite for risk and driving lower higher-yielding currencies, such as the NZ and Australian dollars.

Investors also stayed cautious ahead of monetary policy meetings by the Federal Reserve and Bank of Japan this week.

The United States central bank was expected to reiterate its pledge to keep interest rates very low for an "extended period", but market participants will closely watch the number of dissenters.

Sources said the Bank of Japan was leaning towards easing monetary policy again.

The kiwi strengthened to 0.5126 euro at 8am from 0.5108 at 5pm yesterday, but slipped to 63.42 yen at the local open from 63.80. It eased slightly from the local close to US70.08c against the greenback at 8am, and to A76.74c against the Australian dollar.

The trade weighted index edged up to 64.73 at 8am from 64.70 at 5pm.

In its morning brief, ANZ said downside tests were likely as the NZ dollar remained frustratingly within a narrow range.

US dollar fortunes hung on credit rating concerns and potential slowing of the Chinese economy.

Moody's Investors Service had said the US and Britain had moved substantially closer to losing their AAA credit ratings.

The NZ dollar remained on course for further gains but was tacking to the other side of its recent course, ANZ said.

Support around US69.73c may well be investigated today but attempts to push lower could find the going too difficult.

- NZPA