The New Zealand dollar gained after dairy prices rose at the latest GlobalDairyTrade auction, soothing concerns about the local economy and eroding expectations the Reserve Bank will cut interest rates this month.
The kiwi rose to 65.41 US cents at 8am in Wellington form 64.99 cents yesterday. The trade-weighted index advanced to 70.77 from 70.51 yesterday.
Prices for whole milk powder, New Zealand biggest dairy export, rose 13 percent to US$1,945 a tonne at Fonterra’s latest online auction, and the average winning price across all products gained 9.9 percent to US$2,834. That allayed fears a downturn in the dairy sector would slow economic growth to a crawl, and has lowered expectations the central bank will cut interest rates for a fourth time at its next meeting on Oct. 29.
“The whole commodity sector has recovered in the last week – we’re not out of the woods, but it’s recovered, and obviously the dairy trade auction was positive overnight with long-dated futures pointing to US$3,500 a tonne which is good,” said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional in Auckland. “The kiwi’s still a ‘sell’ on rallies, but those rallies could be up to 66 (US cents).”
The International Monetary Fund lowered its forecast for global growth to 3.1 percent from 3.3 percent, and noted risks were to the downside, which also weighed on the greenback.
The kiwi was little changed at 91.32 Australian cents form 91.28 cents yesterday when it slipped against its trans-Tasman counterpart after the Reserve Bank of Australia was more upbeat than investors were expecting when keeping the target cash rate at 2 percent.
The local currency rose to 4.1568 Chinese yuan from 4.1301 yuan yesterday, which is in the last day of its Golden Week holiday. The kiwi advanced to 78.57 yen from 78.27 yen yesterday, and was little changed at 57.94 euro cents from 58.11 cents. It traded at 42.94 British pence from 42.86 pence yesterday.