WELLINGTON (Dow Jones)--The New Zealand dollar was higher Monday, largely shrugging off the impact of Saturday's 7.1-magnitude earthquake in the city of Christchurch as global risk appetite improved. Chris Hunter, a dealer at Western Union Co.'s Custom House, said better-than-expected U.S. employment data Friday gave the kiwi a boost. "It has removed a lot of fears in the investment community of a double dip recession and as a result equity markets all gained," he said. The New Zealand dollar briefly dipped against the U.S. dollar early in the session as markets digested the impact of Saturday's earthquake, but the local unit swiftly pared those losses as "global risk appetite remains the biggest single driver of the currency and will continue to be so," said BNZ currency strategist Mike Jones. However, "the financial effects of the earthquake could twist the RBNZ's (Reserve Bank of New Zealand's) arm to keep rates on the hold for the rest of the year, which could have a residual effect on the kiwi," Hunter said. Westpac Bank also said any "paring back of expectations for the RBNZ's tightening path will weigh on the New Zealand dollar." Government bonds weakened at the long end, while swap rates pushed higher as investors feared the Debt Management Office would need to issue more bonds to fund any reconstruction. "The curve just steepened on the idea that rates are going to be lower in the short term and any issuance will be in the back end," said a local bond trader. Money markets are now pricing in a 12% chance of a 25-basis point rate hike at the central bank's Sept. 16 review, down from a 24% chance Friday. The median of a snap poll of nine economists taken Monday showed a 75% chance of a pause. Hunter said markets will be closely watching the Reserve Bank of Australia's rate decision Tuesday as well as the Bank of Japan meeting. "Tomorrow seems stacked," he said. -By Rebecca Howard, Dow Jones Newswires; 64-4-471-5990; lucy.craymer@dowjones.com

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