Sharechat Logo

Dollar declines as commodities fall

By Paul McBeth

Wednesday 22nd October 2008

Text too small?
The New Zealand dollar fell against the US dollar and the yen as commodity prices extended their slide on the prospects of a global recession that would erode demand for raw materials.

Prices of copper, gold, oil, and sugar all fell. Weak commodities and concern about a worldwide slowdown, which drove down stocks in the US and Europe, sapped demand for higher-yield, or riskier assets such as the New Zealand and Australian dollars. Exports of commodities such as dairy products, meat and logs accounted for NZ$42 billion in the year ended August 31, equivalent to about a quarter of the New Zealand’s gross domestic product.

“There are ongoing concerns with commodity prices falling,” said Khoon Goh, senior markets economist at ANZ National Bank. “Risk is still the major driver” of the kiwi dollar, he said.

The kiwi fell to 61.07 US cents from 61.39 cents yesterday, and 61.87 yen from 62.05. It rose to 89.68 Australian cents from 89.60 yesterday. The Australian dollar dropped to 68.47 US cents from 68.53 cents yesterday.

The Commodity Research Bureau Index, a broad measure of commodity prices, fell 2.1%, and Agrifax data last week showed dairy prices fell 3%, in US dollars, putting pressure on the Australian and kiwi currencies. The Baltic Dry Index, a measure of international freight and shipping, fell 4.6% last night to a six year low.

Goh said the measures undertaken by governments around the world to shore up the financial sector have “helped stop confidence getting worse,” though investors are increasingly worried about the outlook for global growth.

The yen rose against the euro and the US dollar amid bets that central banks will cut benchmark rates to stymie the global economic slump, encouraging investors to sell high-yielding assets like the New Zealand dollar.

In New Zealand, the Reserve Bank is expected to cut the official cash rate by 100 basis points tomorrow, its largest margin ever, to 6.5%. The rate reduction will likely see the yen put “some pressure on the kiwi,” Goh said.

BusinessWire.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:

SML - Synlait Milk Limited - Trading Halt of Securities
AIA - Auckland Airport announces board chair changes
AIA - Auckland Airport announces board chair changes
CEN - Tauhara commissioning progress update
FPH initiates voluntary limited recall
March 28th Morning Report
KFL Celebrates 20 Years of Excellence in Investment Mgmt.
SVR - Savor FY24 Earnings Guidance & Change in Banking Partner
NZK - NZ King Salmon Investments Limited FY24 Results
March 27th Morning Report