NZ dollar extends gains as dairy prices rise, labour market data looms

The kiwi traded at 68.56 US as at 8am in Wellington from 68.66 cents on Friday in New York.

The New Zealand dollar extended its gains after dairy prices rose more than expected in the latest GlobalDairyTrade auction and traders looked ahead to this morning's first-quarter labour market data, which expected to show steady employment growth and wage inflation.

The kiwi dollar rose to 69.34 US cents as at 8am from 69.18 cents late yesterday. The trade-weighted index rose to 75.20 from 74.99.

Dairy product prices advanced at the GlobalDairyTrade auction, increasing for the fourth consecutive time amid strong demand, with the GDT price index up 3.6 per cent from the previous auction two weeks ago to US$3,166. Some 22,633 tonnes of product was sold, down from 22,927 tonnes at the previous auction.

Whole milk powder rose 5.2 per cent to US$3,233 a tonne. AgriHQ dairy analyst Susan Kilsby there was strong buying from North Asia.

"A further increase in global dairy prices has helped support the NZD," traders at HiFX said in a note. "Ahead of the latest dairy auction the NZD/USD had been threatening to push back below 0.6900 but rose sharply on the back of a fourth consecutive rise in dairy prices."

They said further direction of the kiwi today will be dictated by the labour market figures.

Employment growth is expected to have been 0.8 per cent in the first quarter, unchanged from three months earlier, while the jobless rate slipped to 5.1 per cent from 5.2 per cent. Private wages excluding overtime were expected to have gained 0.4 per cent, unchanged from the fourth quarter last year, while the participation rate held at a robust 70.5 per cent.

"Anecdotes point to higher wage pressures developing, but we'll have to wait until later in the year to see that in the data," said Jason Wong, currency strategist at Bank of New Zealand, in a note.

Once the jobs figures are out of the way, US events will come back into focus.

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The US Federal Reserve is also expected to keep its Fed funds target at 0.75 per cent to 1 per cent, having pencilled in two rate hikes later this year.

Meanwhile, US non-farm payroll employment figures on Friday are expected to show the world's biggest economy added 210,000 jobs in April after an unexpectedly weak March.

The kiwi rose to 92 Australian cents from 91.66 cents late yesterday after Australia's central bank kept its cash rate unchanged as expected. It gained to 4.7775 yuan from 4.7672 yuan and rose to 77.67 yen from 77.37 yen. It gained to 63.44 euro cents from 63.37 cents and traded at 53.58 British pence from 53.63 pence.