The New Zealand dollar rose after Fonterra Cooperative Group yesterday said it would maintain its milk price forecast, expand its local processing capacity and form a partnership to help sell its products in China, New Zealand's largest trading partner.
The kiwi gained to 83.75 US cents at 8am in Wellington, from 83.67 cents at 5pm yesterday. The trade-weighted index was at 78.98 from 79 yesterday.
The local currency has jumped half a US cent in the past 24 hours following the announcement from Fonterra, the world's largest dairy exporter. Dairy is New Zealand's largest commodity export and traders had been concerned the company could have lowered its $6 per kilogram of milk solids forecast for 2015 as increased supply weighs on prices.
"The kiwi was the star of the night as the announcement by dairy giant Fonterra that it's entering a joint venture to meet demand for infant formula in China was met with approval by the market," Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management in New York, said in a note. The investment "suggests that Fonterra may be able to smooth out its delivery problems and also indicates that its stream of income from China - which is a significant contributor to the New Zealand economy - is likely to remain in place."
The kiwi may target 84 US cents, Schlossberg said.