The New Zealand dollar was little changed ahead of the next GlobalDairyTrade auction, the first since dairy exporter Fonterra Cooperative Group slashed its forecast payout for the current season in the face of falling milk prices.
The kiwi traded at 77.45 US cents at 5pm in Wellington from 77.32 cents at 8am and 77.43 cents yesterday. The trade-weighted index was little changed at 77.90 from 78.04 yesterday.
Fonterra holds its first GDT auction since cutting its forecast payout to its farmer shareholder-suppliers to $4.70 per kilogram of milk solids from a previous forecast of $5.30/kgMS. Global dairy prices have almost halved from a peak in February, and the Reserve Bank anticipates a gradual recovery in the price through next year as less competitive suppliers get squeezed out of the market.
"We've got Fonterra's auction tomorrow morning that's the big one," said Michael Johnston, senior trader at HiFX in Auckland. "If it comes in a shocker we'll be heading lower, and if it's not too bad, the kiwi could bounce back."
Dairy prices are is one of a range of commodities that have come under pressure in recent months, and investors are increasingly wary of plunging oil prices which have weighed on stock markets around the global.
HiFX's Johnston said he's been surprised by the kiwi's resilience in the face of the recent volatility, and cheaper oil is likely to cap global inflation, putting off the need for future rate increases by central banks.
New Zealand's government today unveiled its latest set of forecasts, pushing out its projected return to an operating surplus by a year as falling dairy prices and low inflation eat into its tax base. Still, the Treasury upgraded its view on the country's economic potential output due to the soft inflationary environment.
Statistics New Zealand releases third-quarter balance of payments figures tomorrow, and that's followed by gross domestic product on Thursday.
The kiwi rose to 4.7987 Chinese yuan from 4.7957 yuan yesterday after the HSBC flash manufacturing purchasing managers' index came in weaker than expected.
The local currency was little changed at 94.07 Australian cents from 94.13 cents yesterday after minutes to this month's Reserve Bank of Australia meeting showed the board noted market expectations for a rate cut.
The kiwi fell to 90.91 yen at 5pm in Wellington from 91.92 yen yesterday, and declined to 62.15 euro cents from 62.62 cents. It edged up to 49.47 British pence from 49.30 pence yesterday.