The New Zealand dollar trimmed its gains of the start of the week though it may advance again should a return of Chinese buyers to the dairy auction overnight push dairy prices up from the lowest level in more than five years.
The kiwi traded at 78.37 US cents at 5pm in Wellington, little changed from the start of the day, having fallen from 78.98 cents late yesterday as the greenback broadly strengthened. The trade-weighted index fell to 76.43 from 76.68 yesterday.
Dairy product prices fell to the lowest level since August 2009 in the last GlobalDairyTrade auction on Oct. 1, which coincided with the National Day public holiday in China, whose dairy buyers have been working down inventory levels. Since then prices of other food commodities, including wheat, sugar and corn have gained, along with iron ore and logs, stoking speculation milk powder, New Zealand's biggest export, may have found a base.
"The risk is for a better auction tonight," said Tim Kelleher, head of institutional FX sales at ASB. After the last auction the kiwi "gapped down" and a better sale overnight would mean there's "a risk you get a bit of a spike."
Those investors who are still betting on the New Zealand dollar heading lower may be selling into any rallies, he said.
