Dairy, the backbone of New Zealand's export industries, has been the weak link for an economy that's enjoying record migration and tourism, a booming property market and relatively robust manufacturing. Also driving the kiwi higher, the Thomson Reuters/CoreCommodity CRB index, a broad measure of prices for raw materials, rose 1.3 percent overnight to the highest level in a month.
"Commodity currencies had a bounce last night, although the kiwi has been pretty well contained in a relatively tight range," said Mark Johnson, senior foreign exchange dealer at OMF. Should whole milk powder rise as expected at tonight's GlobalDairyTrade auction, "that could give the kiwi a bit of a boost."
The kiwi rose to 94.05 Australian cents from 93.79 cents late yesterday as the Reserve Bank of Australia released the minutes of its last policy meeting where it cut the cash rate to a record low 1.5 percent. Johnson said there were no surprises, with the bank saying its rate cut delivered prospects for an improvement in inflation and that a rising Australian dollar complicated the economy's transition away from its resources base.
Traders are now awaiting the US Federal Open Market Committee minutes on Thursday for any clues to the track of interest rate hikes.
"Expectations for a rate hike this year seem to be dwindling by the day," Johnson said. "Even one rate hike would not make much of a change, although it would maybe be a small vote of confidence in how the US economy is performing."
The kiwi rose to 4.7954 yuan from 4.7699 yuan. It rose to 56 British pence from 55.53 pence, gained to 64.54 euro cents from 64.31 cents, and fell against a broadly stronger Japanese currency to 72.59 yen from 72.68 yen.
New Zealand's two-year swap rate was unchanged at 1.91 percent and 10-year swaps rose 1 basis point to 2.35 percent.
