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Kiwi rises to 2-week high on dairy hopes

NZ Newswire logoNZ Newswire 18/04/2017 Jonathan Underhill

The New Zealand dollar rose to a two-week high on a trade-weighted basis on expectations Tuesday night's dairy auction will be the third in a row to produce rising prices.

The consumers prices index on Thursday will also likely show inflation is back at the mid-point of the Reserve Bank's target range.

The kiwi dollar slipped to US70.06c from 70.22c Monday, to be little changed from 70.02c last Thursday.

NZX dairy futures suggest the price of whole milk powder will rise 5 per cent to 6 per cent at the auction, after a gain of 2.4 per cent at the April 4 event.

The GDT Price Index has gained in each of the past two auctions.

Meanwhile, economists expect inflation was 0.8 per cent in the first three months of the year, for an annual rate of 2 per cent, according to the median in a BusinessDesk poll.

That would exceed the central bank's projection of inflation of 0.3 per cent in the first quarter for an annual rise of 1.5 per cent.

"Higher inflation and a better dairy auction should be helping the kiwi," said Imre Speizer, senior market strategist at Westpac. While the CPI data should be quite strong, it was probably spurred by one-off events and the 2 per cent annual rate may be "the high point for a while".

"The kiwi is one of the more resilient currencies at the moment. We've had the good economic story in the background for quite a while and more timely will be the dairy auction tonight," Mr Speizer said.

The kiwi dollar rose to 76.39 yen from 76.05 yen late Monday. It fell to 4.8261 yuan from 4.8364 yuan. It traded at 55.75 British pence from 56 pence and fell to 65.82 euro cents from 66.12 cents and at A92.70c from 92.48c Monday.

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