By Swati Pandey and Charlotte Greenfield
SYDNEY/WELLINGTON, March 8 (Reuters) - The New Zealand dollar tumbled to a two-month low on Wednesday after the latest dairy auction showed milk prices had suffered heavy losses, raising doubts about a recovery in the country's No. 1 goods export.
The New Zealand dollar NZD=D4 fell for a sixth straight session to as low as $0.6952, a level not seen since Jan. 9. It was last up 0.2 percent at $0.6965.
The kiwi has lost more than 4.5 percent of its value since early February. That is in part due to a resurgent greenback, which has soared on expectations of an interest rate hike in the United States as early as next week.
A dovish Reserve Bank of New Zealand (RBNZ), which has repeatedly signalled it will hold interest rates at a record low 1.75 percent for a couple of years, has also weighed on the currency. addition, dairy prices were turning south again.
Wednesday's fortnightly auction showed average prices fell 6.3 percent at the Global Dairy Trade (GDT) auction, with whole milk powder, a major export, plummeting 12.4 percent. NZD is still attempting to test lower, and the weak details of the GDT auction are unlikely to help sentiment," said Philip Borkin, senior economist, at ANZ Bank.
"For now, the NZD remains a 'sell on rallies', although the still well-performing domestic economy should limit the downside."
Elsewhere, the Australia dollar jumped to a 10-month high against its New Zealand cousin AUDNZD=R , breaking important chart resistance levels.
Against the U.S. dollar, the Aussie inched higher although it stayed trapped in a tight band of $0.7571/7633. It was last up 0.2 percent at $0.7600.
The Aussie dipped briefly after China trade figures left dealers puzzled. Yuan-denominated exports rose 4 percent but imports surged 44.7 percent, leaving traders wondering what the underlying picture was. ECONCN
China is Australia's No. 1 trading partner, while the Aussie is seen as a liquid proxy for the yuan.
New Zealand government bonds 0#NZTSY= eased, sending yields two basis points higher at the long end of the curve.
Australian government bond futures slipped, with the three-year bond contract YTTc1 and the 10-year contract YTCc1 down four ticks at 97.89 and 97.1100 respectively. (Editing by Randy Fabi)