Kiwi wavers around $0.68 before dairy auction

The New Zealand dollar was the strongest performing major on Tuesday morning in Asia ahead of Fonterra's fortnightly dairy auction, which could see the fifth-consecutive rise in global dairy prices.

New Zealand's so-called kiwi bounced back above $0.68 against the US dollar on Tuesday, with fundamentals helping to drive the currency towards its highest level since June.

Fonterra's Global Dairy Trade (GDT) Index has risen sharply at the last four fortnightly auctions, rebounding more than 30% from a trough in August.

The next auction due to take place on Wednesday morning (NZ time) is likely to mark the fifth-consecutive rise in prices, which will continue to drive gains in the kiwi.

Since early September, the NZD/USD pair has jumped close to 8%, with stronger dairy prices and a less hawkish stance from US monetary-policy setters supporting the cross.

Next week's Reserve Bank of New Zealand (RBNZ) cash-rate decision will be key for the currency's direction going forward, with markets pricing in only a small chance of the central bank cutting interest rates at the meeting. However, some economists argue that the recent rebound in the New Zealand dollar may sway the RBNZ to cut next week.