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Dairy rise lifts kiwi above US74c

NZ NewswireNZ Newswire 6/09/2016 Jonathan Underhill

The New Zealand dollar has surged to a 16-month high after prices rose at the latest GlobaldairyTrade auction and data showed growth in the US services sector was weaker than expected.

The kiwi rose to US74.12 cents at 8am on Wednesday in Wellington from US73.16c late on Tuesday. The trade-weighted index climbed to 78.38 from 77.77, to be well above the 76 average level the Reserve Bank has projected for the third quarter.

Fonterra's GlobalDairyTrade price index climbed 7.7 per cent at the latest dairy products auction, adding to expectations that a worldwide glut is easing.

Whole milk powder increased 3.7 per cent to US$2793 a tonne, the highest since October last year. The rebound in dairy prices adds to positive sentiment for the kiwi dollar, which offers a reasonably attractive yield in a world where many central banks have interest rates that are near zero or negative.

"Global milk supply has been tightening more quickly in recent months prompting buyers into action," said ANZ Bank agri economist Con Williams.

"Where to from here will crucially depend on new season milk volumes from New Zealand and how demand holds up in the face of higher prices."

The kiwi dollar was also helped by a weaker US dollar, after the US non-manufacturing ISM composite index fell more than expected to 51.4 from 55.5, a seven-month low, suggesting the services sector in the world's biggest economy isn't as robust as economists had thought.

On Wednesday morning the kiwi rose to 96.42 Australian cents from A95.92c, slipped to 75.63 yen from 75.82 yen and rose to 4.9454 yuan from 4.8878 yuan. It gained to 65.85 euro cents from 65.65c and rose to 55.19 British pence from 54.94p.

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