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Suprise dairy result lifts kiwi

NZ NewswireNZ Newswire 16/08/2016 Paul McBeth

The New Zealand dollar has climbed after dairy prices rose more than expected at the latest GlobalDairyTrade auction, clawing back losses after a Federal Reserve official raised the prospect of an early US rate hike.

The kiwi rose to US72.70 cents at 8am on Wednesday from US72.26c on Tuesday. The trade-weighted index advanced to 76.72 from 76.07.

The local currency dropped from as high as US73.04c after New York Federal Reserve president William Dudley said the world's biggest central bank could raise the federal funds rate next month and that the market was complacent about the need to lift short-term rates.

A stronger-than-expected result at Fonterra's GlobalDairyTrade auction helped the kiwi recover some of that decline with prices for whole milk powder jumping 19 per cent to $US2695 a tonne, and a 13 per cent gain in the trade-weighted basket.

"A bumper result was expected, but expectations were still exceeded," BNZ currency strategist Jason Wong said in a note.

"The NZD now sits at 0.7280. Another unsuccessful attempt to push much beyond 0.73 will have got the attention of technical analysts and that level represents an area of strong resistance."

Local employment data on Wednesday is expected to show the unemployment rate fell to 5.3 per cent in the June quarter, with Statistics New Zealand delaying the release to ensure quality control as they use a new methodology.

Mr Wong said the data could shock the market if it delivers a surprise result. Producer inflation figures will also be watched.

On Wednesday morning, the kiwi rose to 94.43 Australian cents from A94.05c on Tuesday and increased to 72.91 yen from 72.59 yen. It was little changed at 64.49 euro cents from 64.54c and slipped to 55.75 British pence from 56p. It rose to 4.8156 Chinese yuan from 4.6954 yuan.

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