* New Zealand dollar highest since August 2011
* Trade surplus, c.bank comments drive kiwi higher
* Yen retreats after touching 1-week high vs dollar
* Euro steady after ECB-spurred dip
By Patrick Graham
LONDON, March 27 The New Zealand dollar surged
to its highest level since mid-2011 on Thursday, helped by a
sharp rise in its trade surplus and comments from one
policymaker on how to remove limits aimed at cooling house
prices and raise interest rates instead.
The euro, whose slide has been the main focus of this week's
trade in major currencies, steadied, with dealers unwilling as
yet to believe that the European Central Bank will follow
through on hints of more monetary policy easing.
Traders said the day could see substantial flows linked to
the end of the financial year in Japan on Monday and the end of
the month for dealers elsewhere, potentially strengthening
The kiwi gained a full percentage point compared to prices
at the end of the U.S. day, rising to a 2-1/2 year high of
"The trade surplus is supportive, but we have also had
comments from the RBNZ's Spencer, discussing under what
conditions they might decide to remove the macroprudential
measures on housing," said Ian Stannard, a strategist with
Morgan Stanley in London.
"That may let inflation rise and also suggests that they
might tighten policy as well."
The trade surplus was the highest ever for February and the
biggest since April 2011, helped by a rise in dairy exports to
China. Spencer said the limits on low deposit
high risk home loans were worth up to 50 basis points in
interest rate rises by the bank, which began to raise rates from
record lows earlier this month.
Bundesbank chief Jens Weidmann sent a shockwave through
currency markets on Tuesday, appearing to tone down the German
central bank's long held resistance to emergency measures to
further ease monetary conditions in the euro zone.
The euro, still supported by a mix of its strong overall
current account surplus and signs of portfolio investment
flowing back into Europe's troubled lower half, has steadied
Traders believe there is support for the single currency
from a major central bank around a low of $1.3749 that has been
tested twice in recent days. A break of that would bring the
currency to its lowest level since March 6. It traded at $1.3760
in early European trade.
"I still like the euro a bit higher from here," said
Stannard. "But while I wouldn't say it was a line in the sand it
is clear that as we approach $1.40 the sensitivity of the ECB to
the euro's rise increases."
Weidmann said that negative interest rates were an option
and quantitative easing was not out of the question while ECB
chief Mario Draghi reemphasised the bank was ready to act if
inflation came in lower than it expected.
That puts fresh focus on euro zone consumer price data due
on Monday, which economists expect to show subdued inflation of
0.7 percent, below the ECB's annual inflation forecast of 1
percent this year.
"It seems the ECB is concerned about disinflation a bit more
than the market had been led to believe. The ECB seems to be
trying to adjust market expectations as the euro has gained,"
said Shin Kadota, chief FX strategist at Barclays.
Against the yen, the single currency touched a three-week
low of 140.28 yen on trading platform EBS, falling back to
levels seen before this month's ECB policy meeting. It last
stood at around 140.33 yen, down 0.2 percent on the
The yen also touched a one-week high of 101.71 yen against
the dollar, drawing some support from renewed concerns
over Ukraine after U.S. President Barack Obama's tough talk on
Russia on Wednesday. There were also some soft spots in U.S.
durable goods orders data.
In early European trade, the dollar was flat at 102.02 yen.
(Additional reporting by Masayuki Kitano and Hideyuki Sano;
Editing by Toby Chopra)