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NZ dollar gains ahead of dairy auction

NZ NewswireNZ Newswire 17/10/2016 Jonathan Underhill

The New Zealand dollar rose ahead of the next GlobalDairyTrade auction amid expectations prices will rise after two consecutive declines, helping sentiment for the kiwi.

The local currency rose to 71.23 US cents as at 8am in Wellington from 71 cents late on Monday. The trade-weighted index rose to 76.63 from 76.44.

NZX-traded dairy futures are pointing to an increase in prices at the GDT auction on Tuesday night, with Fonterra putting up smaller volumes and squeezing supply.

On Tuesday morning, the market will be focused on the consumers price index for the third quarter, which may show there was no inflation in the period, based on the headline measure, giving the Reserve Bank scope to cut interest rates next month.

"The NZD has edged higher overnight boosted by expectations that tonight's Global Dairy Trade auction will break its two consecutive decline streak and show an increase from the previous auction of between 5 per cent and 10 per cent," traders at HiFX said.

The inflation data "will put further pressure on the Reserve Bank to cut interest rates in an effort to bring inflation back into its 1 per cent-to-3 per cent target range", they said, adding that the market is currently putting odds of a 25 basis point cut next month at 84 per cent.

The kiwi dollar rose to 93.50 Australian cents from 93.38 cents, gained to 58.48 British pence from 58.37 pence, rose to 64.76 euro cents from 64.65 cents, was little changed at 74 yen and it strengthened to 4.7994 yuan from 4.7802 yuan.

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