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NZ dollar extends slide after strong US data, US bond yields at 7-year high

Wednesday 16th May 2018

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The New Zealand dollar fell to a new five-month low as upbeat US economic figures including retail sales and US Treasury bond yields at seven-year highs overshadowed the positive effects of rising dairy prices.

The kiwi dollar fell to 68.56 US cents as at 8am in Wellington from 68.92 cents late yesterday. The trade-weighted index slipped to 72.05 from 72.11.

The US dollar index rose to its highest level this year after figures showed an increase in retail sales while the yield on 10-year Treasuries climbed to 3.08 percent, the highest since mid-2011. While the Federal Reserve has signalled at least two more rate hikes this year, the Reserve Bank last week said rates are firmly anchored at a record low. Market direction out of the US overshadowed the results of the latest Global Dairy Trade auction overnight, which recorded the second straight gain in prices.

"The 0.69 level has now been and gone, as another (modest) lift in global dairy prices was overshadowed by solid US data and 10-year Treasury yields easily pushing up over 3 percent," said Sharon Zollner, chief economist at ANZ Bank New Zealand. "Domestic factors are certainly taking a backseat for now, meaning further moves south remain highly likely."

Zollner said the kiwi is trading near support levels of around 68.50 US cents and will encounter resistance if it rises back up to 70.50 cents.

Overnight, dairy product prices rose at the Global Dairy Trade auction, gaining for the second time in the most recent seven events amid better-than-expected gains for anhydrous milkfat and skim milk powder. The GDT price index rose 1.9 percent from the previous auction two weeks ago. Whole milk powder gained 0.2 percent to US$3,226 a tonne. 

The kiwi was little changed at 91.77 Australian cents. It traded at 57.90 euro cents from 57.95 cents yesterday and at 4.3752 yuan from 4.3742 yuan. It fell to 50.78 British pence from 50.89 pence and to 75.67 yen from 75.74 yen. 

(BusinessDesk)

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