NZ dollar touches 2-week high as oil prices recover ground, boosting optimism

The New Zealand dollar touched its highest level in more than two weeks after oil prices recovered ground following a slump yesterday when oil producers failed to reach agreement on freezing production to bolster prices.

The kiwi hit 69.57 US cents and was trading at 69.46 cents at 8am in Wellington, from 69.21 cents at 5pm yesterday. The trade-weighted index was little changed at 73.08 from 73.06 yesterday.

Currencies linked to commodities, such as the kiwi, Aussie and Canadian dollars, advanced after oil recovered ground, boosting investor appetite for higher risk assets. Oil prices slumped almost 7 percent yesterday after major oil producers couldn't agree at a meeting in Doha on limiting output, disappointing traders who had bet on a deal being reached.

"Oil recovered - you got this big overshoot and then it regathered," said Imre Speizer, Westpac Bank senior market strategist in New Zealand. "The post-Doha oil reaction was a very short-term thing and the signal of don't panic from oil filtered over into equities and currencies."

In New Zealand today, the BNZ-BusinessNZ Performance of Services Index is scheduled for release at 10:30am.

Tonight, the focus will be on the GlobalDairyTrade auction. Westpac's Speizer said he expects prices for whole milk powder, New Zealand's key product, will advance 3.5 percent.

Elsewhere, Australia's Reserve Bank releases the minutes of its last meeting and RBA governor Glenn Stevens is scheduled to speak at a Credit Suisse conference in New York.

The New Zealand dollar fell to 89.61 Australian cents from 90.18 cents yesterday, and slipped to 48.67 British pence from 48.83 pence. It advanced to 61.41 euro cents from 61.31 cents, gained to 75.57 yen from 74.76 yen, and rose to 4.4952 yuan from 4.4838 yuan.