The New Zealand dollar was little changed as traders pondered the impact of drought on the dairy industry, the nation's biggest exporter, offsetting the risk-on tone from US stocks near record highs.
The kiwi dollar traded at 82.57 US cents from 82.42 cents at 5pm in Wellington yesterday. The trade-weighted index was little changed at 75.51.
The government yesterday declared a drought in Northland and hinted that other regions may follow. Fonterra yesterday kept its milk payout forecast unchanged even as global prices for dairy rise. Meantime the Dow Jones Industrial Average rose 1.2 per cent to 14066.15, nearing its 2007 record.
"Some media articles around the drought and the impact on dairy are tempering the strength" of the kiwi dollar, said Alex Sinton, senior dealer at ANZ New Zealand. "It will strengthen up. We've had a reasonable cleanout."
The local currency may trade in a range of 82.25 US cents to 82.95 cents today, Sinton said. It broke through key support below 83 cents this week.
Government figures yesterday showed exports of milk powder, butter and cheese fell 16 per cent to $1.1 billion in January from the same month of 2012 and were down 7.7 per cent in the 12 months through January. Fonterra chairman John Wilson said yesterday the company is "critically aware right now of the difficulties our farmers are experiencing" as extremely dry weather hits milk production and rives up feed costs.
Traders will be watching today for the ANZ Business Outlook for a broader take on business confidence and also will keep Australian capital spending data on the radar, given the Australia's central bank sees investment in the resources sector near its peak.
Sinton said he doesn't expect the Reserve Bank of Australia will be pushed into cutting rates though it will be "actively watching" the figures.
The kiwi dollar rose to 80.76 Australian cents from 80.61 cents. It slipped to 62.90 euro cents from 63.12 cents as the euro broadly strengthened following a successful Italian bond auction. The local currency traded at 54.50 British pence from 54.55 pence.