Kiwi climbs above 83 US cents as prices surge at Fonterra auction
The New Zealand dollar rose above 83 US cents after dairy prices surged at Fonterra's latest online auction as drought threatens to engulf most of the North Island.
The kiwi climbed to 83.18 US cent at 8.30am in Wellington from 82.92 cents yesterday. The trade-weighted index advanced to 76.34 from 76.12.
The average price across all products sold on the GlobalDairyTrade auction website was up 10.4 percent, with whole milk powder prices surging 18 percent. The increased prices come as Hawke's Bay pushes to be declared a drought zone, meaning it will qualify for central government aid, amid arid conditions throughout the North Island.
Dairy products account for about a quarter of New Zealand's annual $45.69 billion in export receipts and movements in their pricing are seen as a barometer for the economy.
"The majority of the move was because of the forthcoming drought and Fonterra's production volume being smaller," says Tim Kelleher, head of institutional FX sales NZ at ASB Institutional. "There's no room to be negative on risk currencies, but the kiwi's not going anywhere fast."
The local currency may trade between 83 US cents and 83.50 cents today, he says. He expects it to face some selling later in the week after News Corp exited its $815 million stake in local pay-TV operator Sky Network Television.
Investors recovered some appetite for higher-yielding assets after softer Chinese data earlier in the week, and the Dow Jones Industrial Average rose 1 percent to 14265.06 in late afternoon trading in New York and faces a record close.
The kiwi was little changed at 81.10 Australian cents from 81 cents yesterday after the trans-Tasman currencies rallied on stronger economic data across the Tasman and the Reserve Bank of Australia keeping rates unchanged.
The local currency rose to 77.60 yen from 77.24 yen yesterday and increased to 63.79 euro cents from 63.62 cents. It was at 55.03 British pence from 54.78 pence.