NZ dollar falls vs Aussie as hard commodity gains outstrip dairy

Friday 25th November 2016

The New Zealand dollar fell against its Australian counterpart as surging prices for iron ore and other hard commodities overshadowed the recovery in dairy prices.

The kiwi dollar slipped to 94.39 Australian cents at 5pm in Wellington from 94.62 cents late yesterday and is heading for a 1.2 percent weekly decline. The local currency rose to 70.19 US cents from 69.80 cents yesterday, when it touched 69.68 cents, the lowest since July.

Prices for iron ore, Australia's biggest commodity export, have gained about 12 percent since Donald Trump won the US presidency on Nov. 8, while copper has made similar gains and coking coal has been advancing. While prices of dairy products are also gaining, with the GDT Price Index up 4.5 percent at the last GlobalDairyTrade auction, that was slower than the 11 percent gain at the previous auction and less than some in the market were expecting.

The kiwi has failed to push decisively lower than 70 US cents, which traders attribute to options maturities with strike prices around that level, and gained today amid news that US Green Party presidential candidate Jill Stein is closing in on the fundraising she needs to request a vote recount in three states.

"Kiwi-Aussie has been a relative commodities story. Base metals have been supporting the Australian dollar pretty strongly," said Graham Parlane, private client manager at OMF. If Stein was successful in overturning the narrow win for Trump in Wisconsin, Michigan and Pennsylvania "you would have a different president", although her chances of success aren't rated highly by the market, he said.

The kiwi dollar has declined more than 5 percent against the greenback since Trump's election victory, which heralds a new policy direction for the US that would include tax cuts and massive infrastructure spending, driving US economic growth, inflation and interest rates. Against that, he has vowed to ditch the Trans-Pacific Partnership agreement and enact trade policies that could have negative implications for trading nations such as New Zealand and penalise China.

The kiwi didn't move much after figures showed New Zealand's trade deficit was $846 million in October, from $1.4 billion last month and $905 million in October last year. Statistics New Zealand said the annual trade gap narrowed to $3.297 billion from $3.356 billion in September.

The trade-weighted index rose to 77.30 from 77.15.The kiwi rose to 56.28 British pence from 56.11 pence late yesterday and traded at 66.30 euro cents from 66.26 cents. It rose to 4.8474 yuan from 4.8285 yuan and gained to 79.57 yen from 78.68 yen.

The two-year swap rate fell 1 basis point to 2.23 percent and the 10-year swap rate was unchanged at 3.28 percent.

BusinessDesk.co.nz

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