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NZ dollar range-bound; dairy auction provides support

Wednesday 21st August 2019

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The New Zealand dollar is range-bound ahead of a key meeting of central bankers later this week but found some support from better-than-expected dairy auction prices.

The kiwi was trading at 64.18 US cents at 8am from 64.22 cents at 5pm in Wellington. The trade-weighted index was at 71.41 points from 71.52.

Dairy prices slipped 0.2 percent in the overnight GDT auction versus an expected 1.0 percent fall. The 2.1 percent lift in whole milk powder price was “particularly positive for our dairy producers,” ANZ Bank said. WMP makes up the bulk of the GDT auction. 

“This bodes well for a $7-plus milk price for the 2019-20 season. Our forecast is currently $7.10/kgMS while Fonterra’s forecast is $6.25 - $7.25,” said economists Michael Callaghan and Miles Workman in a note.

The main events this week, however, will be the release of the minutes from the latest FOMC meeting – due early Thursday New Zealand time. This will be followed by the annual Jackson Hole symposium, which will focus on “Challenges for Monetary Policy." 

Fed chair Jerome Powell is due to speak Friday and his comments will be closely monitored for hints that more policy easing is in store, against the backdrop of ongoing trade tensions, said ANZ Bank. Markets are expecting another 25 basis point rate cut from the Fed in September. 

The kiwi was unchanged at 94.67 Australian cents, and was trading at 52.72 British pence from 52.95, at 57.79 euro cents from 57.92, at 68.14 yen from 68.42 and at 4.5302 Chinese yuan from 4.5394.


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