Sharechat Logo

NZ dollar tumbles; weak dairy prices, benign inflation may slow rate hikes

Wednesday 16th July 2014

Text too small?

The New Zealand dollar tumbled on speculation a slump in dairy prices and inflation data that’s weaker than expected will give the Reserve Bank more room to pause in its interest rate tightening cycle.

The kiwi dropped to 86.98 US cents at 5pm in Wellington, from 87.69 cents at the start of the day and down from 88.07 cents late yesterday. The trade-weighted index fell to 81.04 from 81.86 yesterday.

The local currency’s decline began after Federal Reserve chair Janet Yellen gave what was seen as a more upbeat account of the US economy and the kiwi remained low after the GDT Price Index, a measure of dairy prices, dropped 8.9 percent to the lowest level since December 2012 in the latest GlobalDairyTrade auction. It tumbled again after second-quarter consumer prices rose a less-than-expected 0.3 percent.

“The market has been pricing in a 90 percent chance of a rate hike next week,” said Stuart Ive, senior dealer at OMF. “That is called into question when you combine the milk price falling off a cliff, house price inflation starting to pull back and a market caught somewhat left-sided by weaker CPI data.”

He said the market is now pondering whether today’s events constitute enough data for the Reserve Bank to pause “as early as next week, or at least in September,” especially as it would help drive down a currency that governor Graeme Wheeler has called unsustainably high.

The kiwi traded at 64.14 euro cents from 64.64 cents late yesterday and fell to 50.76 British pence from 51.54 pence. It dropped to 88.49 yen from 89.45 yen and declined to 93.13 Australian cents from 93.73 cents yesterday.

 

 

BusinessDesk.co.nz



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

MARKET CLOSE: Blue-chip stocks Meridian, A2 lead market lower
NZ dollar rises on Brexit hopes, rate cut reassessment
Three not failing, just needs a new owner - MediaWorks CEO
Major investors back new CBL class action targeting directors
Rip Curl purchase a done deal on Kathmandu proxies alone
Comvita chair Neil Craig eyes the exit once he finds a new CEO
Mercury raises guidance on increased storage, high spot prices
Eroad reports strong 3Q sales growth, eyes ASX listing
MediaWorks puts TV business on the block
NZ dollar benefits as preliminary Brexit deal improves risk appetite

IRG See IRG research reports