NZ dollar dips after Fed minutes, US data lift greenback; dairy futures subside

The New Zealand dollar dipped after minutes of the last Federal Reserve meeting showed policymakers see future rate rises being tied to inflation and fiscal stimulus including tax cuts.

The kiwi traded at 70.87 US cents as at 8:30am in Wellington from 71.10 cents before the Fed minutes were released leaving it little changed from late yesterday. The trade-weighted index was at 73.77 from 73.72 yesterday.

The minutes said most participants "reiterated their support for continuing a gradual approach to raising the target range" while tax cuts were expected "to provide some boost to consumer spending" and "provide a modest boost to capital spending". The minutes were released after figures showed US construction spending rose 0.8 percent to a record US$1.26 trillion in November and the Institute for Supply Management manufacturing index rose to a higher-than-expected 59.7 last month.

"The US dollar has been unloved of late and rebounded post the minutes," said Mark Johnson, a senior dealer at OMF. The kiwi may encounter resistance if it rises back to 71.06 US cents and may find support if it falls to 70.29 cents, based on chart analysis, he said.

In the subdued trading post the Christmas-New Year break, and little local news in New Zealand, the next big event to watch will be US payrolls data on Friday, which is expected to show the world's biggest economy added 188,000 jobs in December, down from 228,000 the previous month.

Johnson said while yesterday's dairy auction was "reasonably strong", with whole milk powder (WMP) rising 4.2 percent, milk powder futures failed to keep rallying after the auction.

Still, analysts at AgriHQ lifted the AgriHQ milk price forecast for the current season by 1 cent to $6.10 per kilogram of milk solids following the latest Global Dairy Trade auction, saying while that was still "well shy" of Fonterra Cooperative Group's 2017/18 forecast of $6.40/kgMS, "the likelihood of reaching this forecast has now improved given that WMP prices are tracking higher again."

The kiwi dollar rose to 52.47 British pence from 52.09 pence yesterday and traded at 90.52 Australian cents from 90.63 cents. It gained to 59.02 euro cents from 58.78 cents. It rose to 79.77 yen from 79.57 yen and traded at 4.6079 yuan from 4.6071 yuan.