The prospect of interest rate rises in New Zealand and the United States injected a note of caution in the New Zealand dollar, which hit a two-year high against the euro and a three-month high against the US dollar overnight.
By 5pm, the kiwi was at US72.08c from US71.84c late
yesterday afternoon. Rumours overnight ahead of a hike in Fonterra's forecast milk price payment to farmers helped push the kiwi to a peak of US72.55c.
Today, Fonterra announced an increase in the forecast milk price payment to farmers of 40c to $6.10 per kg of milksolids, estimated as adding $500 million, or 0.3 per cent of gross domestic product, to the economy.
"I think if euro hadn't been sold off, kiwi probably would have gone up to test the overnight highs, but I don't think it would have got too much traction beyond that," HSBC chief forex manager Daniel Brdanovic said.
The kiwi's been gaining ground against the weakening euro for the last year, and hit a two-year high overnight of 0.5437 euro.
By 5pm, the kiwi was at 0.5388 euro, from 0.5347 euro late yesterday.
The kiwi was little changed at 67.68 yen, a touch firmer against sterling at 46.64 pence, and higher against the Australian dollar at A77.85c from A77.44c yesterday afternoon.
"The markets are now focusing on possible improvements in the New Zealand economy, and maybe the New Zealand economy has been on the periphery for a while as the market focused on the booming Australian economy," Mr Brdanovic said.
The trade weighted index firmed to 67.03 from 66.89.
The Reserve Bank of New Zealand releases its decision on interest rates on Thursday, expected to be no change, although the accompanying statement will be of most interest.
The US Federal Reserve rate-setting committee finishes its meeting on Wednesday.
- NZPA
