NZ dollar rises to 10-month high as commodities rally, dairy prices gain

Wednesday 20th April 2016

The New Zealand dollar rose to a 10-month high as commodities continued their rally, and as prices for the country's biggest export, dairy, rose.

The kiwi climbed as high as 70.54 US cents and was trading at 70.48 cents at 8am from 69.96 cents yesterday. The trade-weighted index gained to 73.78 from 73.06 yesterday.

Oil prices extended their recovery from a slump on Monday when investors were disappointed by producers' inability to rein in production, and helped push up the Thompson Reuters/CoreCommodity CRB index 2.2 percent. That stoked demand for commodity sensitive currencies such as the kiwi dollar, which also got a fillip from a bigger-than-expected gain in dairy prices.

"The modest positive result from the overnight GDT dairy auction (+3.8 percent) allowed the upward momentum to continue unabated," Bank of New Zealand strategist Kymberly Martin said in a note. "The NZD/USD now sits at its highest level since mid-June last year, at 0.7040. The NZ TWI, at 73.80, now sits 4 percent above the RBNZ’s projections for the current quarter average, as at its March MPS (monetary policy statement)."

The local currency increased to 62.03 euro cents from 61.79 cents yesterday after European Central Bank figures showed the region's credit conditions eased in the first quarter. The monetary authority will review policy this week. The kiwi was little changed at 48.95 British pence from 48.91 pence yesterday.

The New Zealand dollar increased to 90.14 Australian cents after yesterday's release of minutes to the last Reserve Bank of Australia policy review showed the bank's board viewed its current stance as "very accommodative", a step up from its previous view of being simply accommodative. Separately, governor Glenn Stevens in a speech in New York questioned whether central bank policy had reached its limits.

The kiwi advanced to 76.92 yen from 76.30 yen yesterday, and gained to 4.5516 Chinese yuan from 4.5292 yuan.

BusinessDesk.co.nz

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