The New Zealand dollar rose on Thursday on a relief rally after giant dairy co-operative Fonterra lifted its milk payout forecast, dragging the Aussie a touch higher. The New Zealand dollar jumped half a cent to $0.6288, pulling away from a one-month low of $0.6235 on Wednesday. Much of the strength came after Fonterra increased its farmgate price payout forecast to NZ$4.60 per kilogram of milk solids from a previous forecast of NZ$3.85.
"The key message to take from the upward revision to Fonterra's milk price forecast is that the impact of the downturn in dairy prices is not likely to be as severe as the Reserve Bank of New Zealand (RBNZ) assumed in September," said Con Williams, rural economist at ANZ. Dairy is New Zealand's top export earner and sliding milk prices due to an oversupply is one reason for the nation's sluggish growth. The RBNZ cut interest rates to 2.5 percent earlier this month and flagged more if China's economy continues to slow down.
Analysts expect at least another cut before the end of the year. Moreover, a diverging interest rate outlook with the Federal Reserve is likely to bring the kiwi under renewed pressure. It fell below 62 cents last month for the first time in six years. Resistance was found at $0.6331. The Australian dollar inched up to $0.7000, having skidded around one full cent on Wednesday. It has shed nearly 3 percent this week, in part due to worries about global growth after China released more disappointing data. China is Australia's top export market. Support was found around $0.6983, a key retracement level of the September climb.