The New Zealand dollar remained in a tight range ahead of tomorrow’s Federal Reserve’Open Market Committee decision but was supported by a lift in dairy auction prices overnight.

The kiwi traded at 68.57 US cents at 7:45am in Wellington, unchanged from 5pm yesterday. The trade-weighted index was at 74.27 from 74.24.

Dairy commodity prices continue to rise with a 1.9 percent lift in the Global Dairy Trade price index overnight. Whole milk powder – which makes up the bulk of the auction – rose 4 percent.

“Last night’s result marks the eighth consecutive lift in the index since December. Softening global supply, and more recently Fonterra’s downwards revision to its milk production forecast, have been supportive,” said ANZ Bank FX/rates strategist Sandeep Parekh. 

Rabobank dairy analyst Emma Higgins said prices are underpinned by the risk to milk collections over the tail of the New Zealand season.

“Buyers will be looking to procure volumes before production trails off and the seasonal hiatus takes place until next season. The risk for apathetic buyers waiting in the wings is that the season could end sharply should no meaningful rain emerge over the final weeks of March for hot spots in need,” said Higgins.  

ANZ’s Parekh said, however, the market’s main focus is on the FOMC meeting and notes that “US data releases continued to point to ongoing weak investment to start 2019, which plays into the cautious guidance that the Fed has been giving.” 

Investors are widely expecting the Fed to keep its benchmark overnight interest rate unchanged this week and to reiterate it has time to be patient.

Domestically investors will be watching for today’s current account data, with the economists expecting an annual current account deficit of 3.9 percent of GDP, according to the median estimate in a Bloomberg poll. Thursday’s fourth-quarter GDP data is also in focus, with economists tipping the economy to have grown 0.6 percent versus the central bank’s forecast of 0.8 percent growth in the quarter.  

The New Zealand dollar was trading at 96.69 Australian cents from 96.50, at 51.67 British pence from 51.63, at 60.40 euro cents from 60.42, at 76.40 yen from 76.27 and at 4.6028 Chinese yuan from 4.6053. 

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