NZ dollar gains on strength in commodity markets as dairy auction looms

Tuesday 16th August 2016

The New Zealand dollar gained along with other commodity-linked currencies as a pickup in prices of raw materials boosted sentiment ahead of the GlobalDairyTrade auction tonight.

The kiwi dollar rose to 72.08 US cents as at 8am in Wellington from 71.75 cents late yesterday. The trade-weighted index climbed to 76.33 from 76.07.

The Thomson Reuters/CoreCommodity CRB index, a broad measure of prices for raw materials, rose 1.3 percent to a month-high of 185, while Brent crude oil gained about 3 percent to US$48.41 a barrel. Rising commodity prices tend to benefit the currencies of nations that export raw materials, such as Australia's iron ore, coal and crude oil and New Zealand's dairy, meat and logs. Dairy futures suggest whole milk powder will rise about 10 percent in tonight's auction, adding to a 10 percent gain in the last sale two weeks ago.

"USD remains out of favour and the commodity currencies have seen modest gains," said Jason Wong, currency strategist at Bank of New Zealand. "Expectations are high ahead of the next GDT dairy auction overnight, with another strong gain in prices – possibly as high as 10 percent for whole milk powder – widely anticipated."

Wong said the kiwi may reach resistance at 73 US cents, a level it has failed to sustainably breach in recent months.

Traders are also looking ahead to the household labour force survey for the second quarter, due tomorrow, which is expected to show the unemployment rate rose to 6.3 percent from 6.2 percent, not enough to change expectations for the timing of further central bank rate cuts. Also due out this week, the Federal Open Market Committee minutes will provide details of the Fed's position after it kept interest rates unchanged as expected while pointing to moderate strength in the US labour market and saying near-term risks to the economic outlook had diminished.

The kiwi rose to 93.92 Australian cents from 93.79 cents and gained to 4.7826 yuan from 4.7699 yuan. It rose to 55.94 British pence from 55.53 pence, gained to 64.44 euro cents from 64.31 cents, and advanced to 72.96 yen from 72.68 yen.

(BusinessDesk)

BusinessDesk.co.nz

Comments from our readers

No comments yet