NZ dollar gains on Fonterra forecast, inflation outlook

Photo / Dean Purcell

The New Zealand dollar rose against the greenback, with the currency riding the momentum from yesterday Fonterra Cooperative Group's increased payout forecast and signs of resurgent inflation in a Reserve Bank survey.

The kiwi broke above 80 US cents, a level it hasn't seen since May 3, before paring back, with gains seen after Fonterra, the world's biggest dairy exporter, lifted its forecast 2011 pay-out to farmers to a range of $8 to $8.10.

The cooperative also raised its forecast distributable profit for the current year by 10 cents a share to a range of 50 cents to 60 cents, while keeping the milk price component of the payment unchanged at $7.50 per kilogram of milk solids.

The currency also drew further interest after the Reserve Bank inflation expectation survey showed local businesses see prices accelerating over the next two years, with interest rates likely to rise over the coming 12 months.

The two announcements saw two-year swap rates rise to 3.32 per cent from 3.265.

"The kiwi was definitely the standout performer," said Khoon Goh, head of markets and strategy at ANZ New Zealand.

"Among the major currencies it gained the most, which is not surprising following on from yesterday's Fonterra announcement and the strong inflation reading from RBNZ. The kiwi looks like it will have another crack at 80 cents today."

The kiwi recently traded at 79.74 US cents, up from 79.57 cents yesterday, and was unchanged at 69.44 on the trade-weighted index of major trading partners' currencies.

It was little changed at 75.42 Australian cents from 75.50 cents previously, and rose to 65.36 yen from 65.10 yen.

It fell to 56.45 euro cents from 56.60 cents yesterday, and dropped to 49.23 pence from 49.36 pence previously.

The euro saw a relief bounce, gaining to US$1.4121 from US$1.4054 yesterday, although Greek sovereign debt continue to stalk the market, with European Central Bank and International Monetary Fund policy markets under increased pressure to unveil a rescue for the indebted country before it defaults.

Commodity prices snapped their recent decline, with the Thompson Reuters Jefferies CRB Index, a measure of 19 commodities, gaining 0.7 per cent to 339.1.

Global equities also pared their recent losses, with the Standard & Poor's 500 Index recently trading 0.2 per cent higher at 1319.23, while Europe's Stoxx 600 closed 0.2 per cent up at 275.39.

The kiwi may trade between 79.40 US cents and 80.10 cents, Goh said.