The New Zealand dollar recovered more ground as fears of weaker exports and lower payouts to farmers receded following a food contamination scare at Fonterra Cooperative Group, the nation's largest company.
The kiwi rose to 78.98 US cents at 8am in Wellington from 78.51 cents at the 5pm market close. The trade-weighted index advanced to 74.67 from 74.37 yesterday.
The kiwi this morning rose above 79 US cents, returning to the levels it traded at before Fonterra said on Saturday it had found bacteria which can cause botulism in some of its dairy products. Traders eyeing Fonterra's regular GlobalDairyTrade auction this morning said the 2.4 per cent modest fall in prices was well within normal volatility, suggesting the food contamination scare won't weigh too heavily on milk prices for farmers.
"The kiwi has been the strongest performing currency overnight, most of it is driven off receding fears about New Zealand dairy exporters," said Mike Jones, currency strategist at Bank of New Zealand. "We saw a positive dairy auction this morning and that has further restored confidence in New Zealand dairy and the kiwi dollar has crept higher as a result."
Fears of the potential impact on New Zealand exports saw the local currency weaken on Monday to a month low of 76.99 US cents.