NZ dollar holds gains ahead of dairy auction as yen remains weak
The New Zealand dollar held its gains ahead of the GlobalDairyTrade auction as traders ponder the prospects for prices to bottom out for the nation's biggest export commodity.
The kiwi dollar rose to 79.34 US cents from 79.18 cents at the start of the day and from 79.58 cents yesterday. It traded at 92.52 yen from 92.23 yen yesterday.
At the last dairy auction two weeks ago, whole milk powder rose while the prices of most other powders declined, sending the GDT price index lower. Fonterra chief executive Theo Spierings has said a recovery in whole milk powder prices is needed for the dairy exporter to meet its forecast payout to farmers. The yen held near a seven-year low against the greenback amid speculation Japanese Prime Minister Shinzo Abe will delay a planned sales tax increase, after data confirmed the economy is in recession, and may call an election to seek a mandate for his economic reforms.
"The market is biding its time ahead of the milk auction tonight, and will be looking at it more closely than usual," said Imre Speizer, senior market strategist at Westpac Banking Corp. "The market is primed for another weak result so a bigger surprise would be a bounce - then we would see a sharp gain in the kiwi."
The kiwi dollar rose to 63.60 euro cents from 63.40 cents yesterday, having touched a two-month high of 63.75 cents after European Central Bank president Mario Draghi said the bank may buy government bonds to stimulate the Eurozone economy.
The New Zealand dollar rose to 90.94 Australian cents from 90.58 cents yesterday and gained to 50.69 British pence from 50.63 pence. The trade-weighted index increased to 78.70 from 78.60 yesterday.