By LUCY CRAYMER The New Zealand dollar rallied against the U.S. dollar and Australian dollar late Thursday on buying ahead of the release of the government's budget, which included economic forecasts. Investors bought on expectations that the government would upgrade its forecasts in the budget released midway through trading session, said Westpac WBC.AU -0.85% currency strategist Imre Speizer. Which it did: The government now forecasts the economy will grow by 3.0% in the fiscal year to March 2015, rather than 2.5%. It expects drought which affected the agriculture sector earlier this year to knock 0.7% off growth in the 2013 calendar year. The New Zealand dollar touched a nearly four-and-a-half-year high of 0.8358 Australian dollars from 0.8302 Australian dollars late Wednesday, after the Australian dollar breached $0.9850 support. The New Zealand dollar was at $0.8218 compared with $0.8209 late Wednesday. Strength in the government's outlook indicated New Zealand's economy is looking in better shape than Australia's, Mr. Speizer said. The New Zealand dollar also found support early in the day from the BNZ Capital-Business NZ seasonally adjusted performance of manufacturing index, which was 54.4 in April compared with 53.4 in March. A reading above 50 indicates expansion in manufacturing activity. The New Zealand April 2015 government bond was unchanged at 2.50%, whereas the April 2023 bond fell 6 basis points to 3.42%. The Debt Management Office will sell around 5 billion New Zealand dollars worth of nominal government bonds in fiscal 2014. The announcement at 0200 GMT pushed prices higher as market participants had widely expected there a larger number of nominal bonds available at tender over the 2014 financial year, said a local bond trader.

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