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NZ dollar rises with Fonterra 2016 forecast due tomorrow

NZ dollar rises with Fonterra 2016 forecast due tomorrow

By Paul McBeth

May 27 (BusinessDesk) - The New Zealand dollar bounced from a two-month low in local trading as investors await the outcome of today's Fonterra Cooperative Group's board meeting, which is expected to have settled the first forecast payout for next season, for release tomorrow.

The kiwi rose to 72.50 US cents at 5pm in Wellington from 72.18 cents at 8am, still down from 73.13 cents yesterday. The trade-weighted index declined to 75.88 from 76.15 yesterday.

New Zealand's currency fell during Northern Hemisphere trading last night as investors rallied behind the greenback following upbeat economic data, reinforcing expectations the US Federal Reserve will shift away from its ultra-loose monetary policy this year.

Local focus is on Fonterra's payout update for the 2015/16 season, which is expected tomorrow. The 2014/15 payout is forecast to be $4.50 per kilogram of milksolids, a plunge from last year's record $8.40 per kg/MS.

All eyes are on the 2015/16 season as two seasons of low payouts in a row would place financial strain on many dairy farmers, whose production is a bellwether for Zealand's export and economic performance.

Rival Westland Milk Products today affirmed its payout for the current season and expects an increased payout for 2016, assuming Chinese buyers return to the market.

"ANZ (Bank)'s forecast for the milk price is $5 to $5.25 (per kilogram of milk solids) for the season, and an advance payment of $3.50. These two things are really interesting and the advance payout is probably, for farmers, the more important of the two," said Sam Tuck, senior FX strategist at ANZ Bank New Zealand in Auckland. "Everyone is waiting for the Fonterra milk price announcement to make sure they're not off-base with that, and the kiwi will probably sit around here for the moment."

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Fonterra today said New Zealand milk production was 8 percent higher in April than the same month a year earlier, taking year-to-date production to 2 percent above the prior comparable period. Australian milk production was 7 percent higher in April, and up 6 percent for the season so far.

The New Zealand Institute of Economic Research today estimated the country's economy would grow at about 3 percent per year until 2017, driving job growth and reducing unemployment, though low inflation is expected to keep a lid on interest rates.

New Zealand's two-year swap rate was unchanged at 3.37 percent at 5pm in Wellington from the same time yesterday, and the 10-year swap rate slipped to 3.98 percent from 4.01 percent.

The kiwi dollar advanced to 93.55 Australian cents from 93.36 cents yesterday, and dropped to 4.4983 Chinese yuan from 4.5382 yuan. It fell to 66.56 euro cents from 66.87 cents, and declined to 47.06 British pence from 47.33 pence. The kiwi increased to 89.23 yen at 5pm in Wellington from 89.10 yen yesterday.

(BusinessDesk)

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