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Kiwi climbs over US71c as Fonterra milk prices surge

Thursday 2nd September 2010

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The New Zealand dollar climbed back over 71 US cents as milk prices jumped unexpectedly on Fonterra's online auction, while global sentiment took a boost from upbeat American data.    

Whole milk powder prices surged 19% on Fonterra's globalDairyTrade as the Russian drought raised fears about the security of future dairy supply. That carried on the upbeat sentiment about Australasia, with data showing Australia's economy grew 1.2% in the second quarter.

Investors' appetite for higher-yielding, or riskier, assets grew yesterday as the ISM manufacturing survey gained when it was forecast to contract, allaying concerns about a double-dip recession.

"There was a better Australian GDP figure yesterday, Fonterra had a pretty stellar result for its online auction, and refreshed risk appetite combined to send the kiwi higher," said Mike Jones, strategist at Bank of New Zealand.

"We'll continue to see buyers on dips for the kiwi" as investors remain upbeat, he said.

The kiwi climbed to 71.19 US cents from 70.65 cents yesterday, and rose to 66.26 on the trade-weighted index of major trading partners' currencies from 65.84. It increased to 60.07 yen from 59.34 yen yesterday, and gained to 78.20 Australian cents from 78.08 cents. It advanced to 55.56 euro cents from 55.23 cents yesterday, and was little changed at 46.05 pence from 45.93 pence.

Jones said the currency may trade between 69.90 US cents and 71.40 cents today, and will probably drift off over the next couple of days.

Firm Chinese manufacturing data yesterday helped stoke investors' appetite for risk, and the optimism in Asian markets spill over into Europe and North America, with the Dow Jones Industrial Average gaining 2.5% at the close.

The European Central Bank meets today in Europe, and is expected to keep rates on hold, while the next major data release is US non-farm payrolls on Friday.

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