Thursday 3rd April 2014
|Text too small?|
The New Zealand dollar was the worst-performing major currency overnight on speculation lower dairy commodity prices will weigh on economic growth.
The kiwi was the worst performing currency tracked by Reuters overnight, falling as low 85.45 US cents after rising as high as 87 cents earlier this week. The local currency was at 85.58 cents at 8am in Wellington from 86.02 cents at 5pm yesterday. The trade-weighted index fell to 80 from 80.37 yesterday.
Investors reduced their New Zealand dollar holdings after dairy product prices had the biggest drop in almost 20 months at yesterday's Fonterra Cooperative Group GlobalDairyTrade auction, with whole milk powder falling to its lowest level in more than a year. That marked the fourth straight decline in auction prices and raised concerns about the outlook for New Zealand's 40-year high terms of trade, which are seen as a factor underpinning accelerating economic growth this year.
"Globally the market is focusing on dairy trade," said Sam Tuck, senior foreign exchange strategist at ANZ Bank New Zealand. "It is a clear signal to not only New Zealanders but also the globe that a 40-year high peak in terms of trade can't be considered a one-way bet.
"It was a catalyst for a correction back to where we have been recently, rather than a complete game changer," Tuck said. "The kiwi had got too high, within a cent and a half of its post-float high."
ANZ expects the New Zealand dollar to decline to 83 US cents by the end of the second quarter as the US economy improves. Traders will be looking to tonight's ISM non-manufacturing survey and tomorrow's payroll report to gauge how the world's largest economy is tracking, Tuck said.
"Our central expectation is for continued pressure on the New Zealand dollar from here," Tuck said.
The kiwi will likely trade between 85 US cents and 86.10 cents today, ANZ said.
The New Zealand dollar dropped to 92.55 Australian cents from 93.06 cents yesterday. Today, Reserve Bank of Australia governor Glenn Stevens is scheduled to speak at a business lunch to the American Chamber of Commerce in Australia and Australia also has data on retail sales and international trade.
The local currency slipped to 62.18 euro cents from 62.31 cents yesterday ahead of the European Central Bank meeting today.
The kiwi fell to 51.48 British pence from 51.73 pence yesterday and weakened to 88.81 yen from 89.30 yen.
NOTE: please be advised to read full articles from Business Desk Website, you will have to pay a subscription fee on their website.
No comments yet
NZ dollar holds gains on improved dairy, bank capital outlook
MARKET CLOSE: NZ shares gain; banks rally on Reserve Bank capital decision
NZ dollar rises; bank capital rules less harsh than expected
RBNZ relaxes capital requirements, allows preference shares, extends phase-in
NZ dollar extends gain amid mixed US data, possible trade progress
MARKET CLOSE: NZ shares dip on eve of major regulatory decisions
NZ dollar sees off global headwinds, holds above 65 US cents
NZ dollar holds above 65 US cents; dairy auction prices mixed
Dairy index falls on weaker butter, milk fat demand
MARKET CLOSE: NZ shares join global decline; US tariff move weighs on exporters