NZ dollar hits month-high

Photo / Dean Purcell

The New Zealand dollar climbed to a month-high as investors rallied behind commodity-linked currencies amid the global food shortage and milk powder climbed to the highest level in two-and-a-half years in Fonterra Cooperative Group's latest online auction.

The Australian dollar surged 1.7 per cent to US$1.0127 after the Reserve Bank of Australia held its benchmark rate at 4.75 per cent and remained positive about the nation's economic outlook in the face of major flooding in Queensland.

That comes as food shortages continue to cause unrest in African and Middle Eastern nations facing high unemployment, with commodity prices on both sides of the Tasman reporting gains last month in the RBA's and ANZ's indexes, released yesterday.

A 7.1 per cent gain in the trade-weighted price of dairy products sold on Fonterra's globalDairyTrade platform added to the story, with whole milk powder recording its second-highest result since trading began in July 2008 at US$3995 a tonne.

"Food is the commodity of the moment, and New Zealand and Australia can feed themselves," said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional.

"Until the kiwi goes through 73 US cents and the Aussie goes through 98 (cents), they'll stay in an uptrend."

The kiwi climbed to 77.91 US cents from 77.40 cents yesterday, and rose to 68.85 on the trade-weighted index of major trading partners' currencies from 68.68.

It fell to a week-low 76.96 Australian cents from 77.15 cents yesterday, and was little changed at 63.39 yen from 63.35 yen.

It recently traded at 56.37 euro cents from 56.34 cents yesterday, and rose to 48.29 pence from 48.14 pence.

Kelleher said the currency may trade between 77.75 US cents and 78.25 cents today.

The US dollar fell 0.6 per cent to 77.01 on the Dollar Index, a measure of the greenback against a basket of six currencies, even after reporting a six-and-a-half year high in the ISM manufacturing survey.

Kelleher said US data is favouring a rebound in the world's biggest economy, and "at some stage Bernanke and co. will have to take their foot of the pedal and start easing."

The Ivory Coast's CFA franc fell 0.4 per cent to 474.75 per US dollar after it defaulted on a repayment of US$2.3 billion of Eurobonds, the first nation to miss a payment in a year.

The West African nation's been struggling with political unrest that's led to deaths of at least 271 people after President Laurent Gbagbo and his rival Alassane Ouattara both claimed victory in the November election.