The New Zealand dollar rose after lower volumes helped push up prices at Fonterra's GlobalDairyTrade auction overnight. The kiwi touched a fresh post-float high against the Australian dollar as investors favour the outlook for the local economy.
The kiwi increased to 77.92 US cents at 8am in Wellington, from 77.28 cents at 5pm yesterday. The local currency touched 96.22 Australian cents, its highest since the Aussie was floated in 1983, and was trading at 95.95 cents at 8am from 94.97 cents yesterday.
The New Zealand dollar outperformed its peers overnight after prices rose 3.6 per cent at the latest dairy auction as volumes fell, stoking optimism about a recovery ahead for New Zealand's largest commodity export after a 48 per cent fall in prices last year. The kiwi was also bolstered by reports China is speeding up work on 7 trillion yuan of infrastructure projects to revive slowing growth, boosting optimism about the outlook for New Zealand's largest trading partner.
Bank of New Zealand currency strategist Raiko Shareef said much of the New Zealand dollar's record-breaking run could be put down a lack of liquidity in typically quiet Christmas-New Year trading and that the real test would be next week, when markets are back in full swing.
"But I would not fully discount this move into higher territory," Shareef said. "Being at a fresh post-float high is probably justified given how negative sentiment is around Australia and given New Zealand is in a better economic situation than many of its peers," he said.