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NZ dollar slips after rising above 69 US cents overnight; dairy prices rise but on lower volumes

Wednesday 6th December 2017

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The New Zealand dollar fell from its overnight highs against the greenback as dairy prices gained at the latest auction but on lower volumes. It rose against the Aussie dollar after the Reserve Bank of Australia kept its cash rate at a record low.

The kiwi traded at 68.81 US cents as at 8am in Wellington, having touched 69.07 cents late yesterday. It rose to 90.43 Australian cents from 90.21 Australian cents yesterday.

The GDT price index rose 0.4 percent in the latest GlobalDairyTrade auction, the first gain in five auctions, while whole milk powder climbed 1.7 percent. But overall volumes of product sold fell to 29,514 tonnes from 35,042 tonnes two weeks ago and the price gain may reflect concerns New Zealand production will be hampered by dry conditions over the summer months. The kiwi gained yesterday after acting Reserve Bank governor Grant Spencer said in a speech that the central bank is adopting a more flexible approach to inflation targeting, given persistently low inflation. His Australian counterpart Philip Lowe also cited low inflation while keeping the cash rate at 1.5 percent.

"We’re closely monitoring possible drought conditions developing in NZ, which could lead to higher pricing ahead, but at the expense of much weaker volumes," Jason Wong, a currency strategist at Bank of New Zealand, said in a note. Spencer's speech "revealed a slight hawkish bias, as implicit by the bank’s projected rate track at the last MPS," he said.

The trade-weighted index was at 72.64 from 72.62.

With no economic data scheduled for release in New Zealand, traders are likely to keep an eye on gross domestic product for the third quarter in Australia, expected to show economic growth slowed to 0.7 percent from 0.8 percent.

The New Zealand dollar was little changed at 51.20 British pence from 51.19 pence and rose to 58.25 euro cents from 58.05 cents after figures showed European retail sales dropped 1.1 percent in October versus expectations of a 0.7 percent decline. It was at 77.54 yen from 77.56 yen and fell to 4.5518 yuan from 4.5579 yuan.


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