The New Zealand dollar broke above the US78 cents overnight after a bout of weaker-than-expected data out of the US saw the greenback retreat and spurred stimulus bets.
The kiwi recently traded at US78.12 cents, up from US77.73c at 5pm yesterday, while on the Trade Weighted Index of major trading partners' currencies rose to 70.80 from 70.64.
US inflation data for May showed that consumer prices rose 1.7 per cent versus the same month a year ago, short of the 2 per cent level the Fed was targeting. That was followed by spike in the number of US unemployment support claims, which came in at 386,000 for the week, 10,000 higher than expected.
"Weak US data and a bout of short-covering in the euro weighted on the US dollar, propelling most of the major currencies higher," said Mike Jones, a market strategist at Bank of New Zealand.
The softer figures, somewhat conversely, provided a tailwind for US equity markets overnight, adding fuel to the speculation that a stall in the US recovery will force the Fed to add stimulus to the world's biggest economy.
On Wall Street, the Standard & Poor's 500 Index rose 1.1 per cent to 1328.89 in afternoon trade.
Still, the overall mood is very cautious ahead of the Greek election this weekend, with the event seen as the potential catalyst for a major financial meltdown. The early results will only be known late Sunday, which means the New Zealand market will be the first to react on whether the Greeks remain in the euro zone or not.
Those fears again played out on fixed income markets, with Italian 10-year bond yields breaking above the 6 per cent mark, and yields on equivalent Spanish bonds hovering just shy of 7 per cent. Economists consider 6 per cent to be the absolute upper threshold of long term affordability.
"Nervousness ahead of the Greek election on Sunday should keep markets constrained today but Monday has the potential to be explosive," said Imre Speizer, rates strategist at Westpac Institutional.
On the crosses, the kiwi recently traded at 78.14 Australian cents, up from A78.06c yesterday, and it rose to 61.96 yen from 61.73 yen. The New Zealand dollar gained to 61.88 euro cents from 61.80 euro cents, and rose to 50.21 pence from 50.07 pence.
The kiwi may trade between a range of US76.80c and US78.50c according to an ANZ report, with the wide spread reflecting the uncertainty surrounding the Greek vote.