Kiwi climbs after big spike in dairy auction

The New Zealand dollar climbed after figures showed the US consumer price index was flat last month while the price of whole milk powder jumped to a 10-month high overnight.

The kiwi rose to US72.52c at 5pm yesterday, from US72.26c on Tuesday. The trade-weighted index advanced to 76.68 from 76.07 on Tuesday.

The US Department of Labour’s CPI measure showed no change for July, in line with forecasts but still underlining how far the Federal Re- serve is from achieving its inflation target of 2 per cent to 2.5 per cent.

That dented sentiment for the greenback although it did find some support after New York Fed president William Dudley said the market had become complacent about the need to lift interest rates.

Meanwhile, whole milk powder, the biggest dairy product by volume that Fonterra sells, jumped 19 per cent to US$2695 a tonne.

“The kiwi has been resilient in the face of bad news and benefited from good news,” said Mitchell McIntyre, senior corporate FX dealer at NZForex. “There’s a good chance it’s going to test higher.”

Traders are now awaiting the release of the minutes of the last Federal Open Market Committee meeting, due out today. While traders don’t expect any surprises the greenback would likely gain if the minutes show the Fed is slightly more hawkish than expected about raising interest rates, McIntyre said.

“I don’t think we’re going to see a hike out of them anytime soon.”

The local currency rose to A94.54c from A94.05c on Tuesday and increased to ¥73.14 from ¥72.59. It slipped to 64.37 euro cents from

64.54c and dropped to 55.67 British pence from 56p. The kiwi rose to 4.8087 Chinese yuan from 4.6954 yuan on Tuesday.

New Zealand’s two-year swap rate rose 4 basis points to 1.95 per cent and 10-year swaps rose 4 basis points to 2.39 per cent.