NZ dollar pares decline after Fonterra raises forecast payout to farmers
By Tina Morrison
Feb. 27 (BusinessDesk) – The New Zealand dollar pared its decline after Fonterra Cooperative Group raises its forecast payout for dairy farmers to a record.
The kiwi climbed to 83.11 US cents at 9am in Wellington, from 82.90 cents at 8am and 83.30 cents at 5pm yesterday after Fonterra hiked its forecast pay-out to farmers by 35 cents to $8.65 per kilogram of milk solids to farmers in the 2013/14 season, up from a previous forecast of $8.30 per kgMS. The dairy company held its forecast dividend of 10 cents per share.
Fonterra, the world's biggest dairy exporter, has raised its forecast pay-out to farmers as global demand for milk powders remains strong. The local currency was weaker against the US dollar as investors favoured the greenback amid political tensions in Russia and the Ukraine and following a report that new home sales in the US surged to a 5 ½ year high in January, easing concerns about a slowdown in the housing market.
“It was a night of USD strength, which gained against all the major currencies as well as a wide swathe of emerging market currencies,” Bank of New Zealand currency strategist Raiko Shareef said in a note.
In New Zealand today, traders will be eyeing data on January trade figures and net migration at 10:45am.
In Australia, fourth quarter capital spending data is expected to show weakness as the mining boom slowed. The report, scheduled for release at 1:30pm New Zealand time, will also give the first estimates of 2014-15 spending.
The New Zealand dollar touched a 10-day high of 92.69 Australian cents early this morning and was trading at 92.58 cents at 8am in Wellington from 92.47 cents at 5pm yesterday.
The Australian currency has been under pressure this week following weakness in the Chinese yuan, as the Aussie is traded as a proxy for the Chinese currency which is not freely traded. Also damping demand for the Aussie, government figures yesterday showed a weak residential building market pushed down the value of construction in the fourth quarter of last year.
In the US, traders are expecting new Federal Reserve chair Janet Yellen to signal that the central bank will continue to taper its bond-buying programme in testimony before the Senate Banking Committee today.
The New Zealand dollar edged lower to 49.81 British pence from 49.95 pence yesterday, slipped to 85.01 yen from 85.28 yen and was unchanged at 60.63 euro cents. The trade-weighted index weakened to 78.03 from 78.19 yesterday.