Sharechat Logo

NZ dollar rises vs. Australian dollar as futures point to gain at dairy auction

Tuesday 15th March 2016

Text too small?

The New Zealand dollar rose against the Australian dollar on speculation rising milk powder futures on the NZX point to a gain in prices at the GlobalDairyTrade auction overnight.

The kiwi rose to 88.91 Australian cents at 5pm in Wellington from 88.75 cents at the start of the day, to be little changed from its levels late yesterday. The local currency fell to 66.67 US cents from 67.48 cents yesterday, as the greenback broadly strengthened ahead of the Federal Reserve's interest rate decision this week.

Milk powder futures are up between 1 percent and 2 percent, suggesting prices of dairy products are set to rise for the second auction in a row after four straight declines. Weak prices for dairy products amount to a risk to the New Zealand economy because they are the nation's biggest export and dairy farmers faced with little or no return will spend less in the local economy to keep a lid on costs.

"There's just a hint of buying interest from these dairy prices," said Graham Parlane, a dealer at OMF. "Outside of the US dollar, the kiwi is a fraction firmer ahead of the dairy auction."

Parlane said he doesn't expect much reaction from the release of balance of payments data for the fourth quarter tomorrow, which is expected to show a shrinking current account deficit. Traders will be watching economic growth figures on Thursday for any signs of slowing momentum. Gross domestic product rose 0.7 percent in the final three months of 2015, based on market consensus and the Reserve Bank, as the economy continued its rebound from a weaker first half.

Parlane said the longer-term trend for the kiwi is down as the local economy faces challenges including the winding down of the residential rebuild in Christchurch and heat coming out of the Auckland housing market. The Reserve Bank's signal last week that it has a further rate cut to come is also weighing on the currency, he said.

The Federal Reserve's two-day meeting starts on Tuesday in Washington. With the market pricing in only a small chance that the Fed will raise rates at this meeting, the focus will be on any clues as to the future path for rate increases, traders said.

The kiwi fell to 75.57 yen from 76.81 yen yesterday and fell to 4.3323 yuan from 4.3816 yuan yesterday. 

The New Zealand dollar dropped to 59.95 euro cents from 60.48 cents yesterday, and slid to 46.64 British pence from 46.92 pence. The trade-weighted index fell to 71.30 from 71.94 yesterday. 

The two-year swap rate was unchanged at 2.26 percent and 10-year swaps rose two basis points to 3.07 percent.


  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
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