NZ dollar holds gains as dairy auction looms
By Paul McBeth
Sept. 16 (BusinessDesk) - The New Zealand dollar held gains in local trading after weak US industrial production sapped demand for the greenback, and ahead of an upcoming dairy auction, which will offer a gauge on New Zealand's biggest commodity export.
The local currency traded at 81.62 US cents at 5pm in Wellington from 81.72 cents at 8am, up from 81.26 cents yesterday. The trade-weighted index advanced to 78.46 from 78.07 yesterday.
The kiwi got a boost against the greenback after weaker than expected US industrial production figures created a little uncertainty for investors ahead of this week's Federal Reserve policy review. The run of strong data out of the world's biggest economy has raised expectations the Fed might start talking about moving away from running a zero interest rate policy, which has been boosting demand for the US dollar. More immediately, traders will be watching the next dairy auction on Fonterra Cooperative Group's online platform, GlobalDairyTrade, to see whether plunging prices have bottomed out.
"People are a little nervous around the FOMC (Federal Open Market Committee)," said Michael Johnston, senior dealer at HiFX in Auckland. "The market has got the view that any upside in the kiwi is an opportunity to sell at better levels."
HiFX's Johnston said the dairy auction will be "eagerly watched" and would need a strong gain for the kiwi dollar to rise.
The New Zealand dollar rose to 90.58 Australian cents at 5pm in Wellington from 90.32 cents yesterday after Reserve Bank of Australia assistant governor Christopher Kent told a business audience in Sydney the strong Australian currency continues to erode investment in the tradable sector, and that further decline would support local producers who compete with importers.
The kiwi gained to 63.08 euro cents from 62.71 cents yesterday, and rose to 50.32 British pence from 50.05 pence. It increased to 87.53 yen from 87.18 yen yesterday.