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NZ dollar may gain on expectations Fonterra will increase forecast payout to farmers

Wednesday 29th May 2013

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The New Zealand dollar may rise on expectations Fonterra, the nation's largest exporter, will raise its forecast payout to farmers.

The kiwi was little changed at 80.82 US cents, from 80.81 cents at 5pm yesterday. The trade-weighted index edged up to 76.55 from 76.38 yesterday.

Fonterra, which is the world's largest dairy exporter, is expected to announce its payout for the 2014 season today after its board of directors met yesterday. An increase would put more cash in the hands of farmers and provide a lift for the broader economy.

"The New Zealand dollar could gain some support domestically" from an increase in the Fonterra payout, Kymberly Martin, a strategist at Bank of New Zealand, said in a note. "We expect it should be well above the current estimate for the season just ending."

Fonterra said in March it would pay $5.80 per kilogram of milk solids and pay an annual dividend of 32 cents per share. It firmed up annual earnings guidance to between 45 and 50 cents per share, from a previous range of between 40 cents and 50 cents.

BNZ expects the New Zealand dollar to trade between 80.60 US cents and 81.50 cents today.

In the US, reports yesterday showed consumer confidence reached the highest level since February 2008 and home values jumped the most in seven years.

The Conference Board's index of consumer sentiment climbed more than forecast to 76.2, from a revised 69 in April. The Standard & Poor's/Case-Shiller index of property values increased 10.9 percent in March from a year earlier, the most since April 2006.

The local currency edged up to 83.95 Australian cents from 83.86 cents yesterday ahead of capital expenditure figures tomorrow which are expected to show Australia's mining boom has peaked.

The kiwi rose to 82.68 yen from 82.42 yen yesterday after an adviser to Japanese prime minister Shinzo Abe said the nation's central bank can add to its stimulus if necessary to support economic revival.

The New Zealand dollar increased to 62.87 euro cents from 62.56 cents and gained to 53.74 British pence from 53.51 pence.

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