Wednesday 3rd December 2014 |
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The New Zealand dollar fell after prices for the nation's largest commodity export declined in the latest GlobalDairyTrade auction overnight.
The kiwi weakened to 77.91 US cents at 8am in Wellington, from 78.76 cents at 5pm yesterday. The trade weighted index dropped to 78.25 from 78.71 yesterday.
Dairy product prices slipped to a fresh five year low in the latest fortnightly auction, because of a drop in whole milk powder. The GDT average winning price slid 1.1 percent to US$2,513, the lowest level since August 2009, and down from US$2,561 two weeks ago.
The kiwi also faced headwinds from a stronger US dollar after Federal Reserve vice chairman Stanley Fischer said the Fed was coming close to removing its pledge to keep rates low for 'a considerable time', signalling rates could rise in six months. The US dollar index, which measures the greenback against a basket of currencies, touched 88.651, its highest in more than four years.
"The kiwi is under pressure from two fronts," said ANZ Bank New Zealand senior FX strategist Sam Tuck. "The US dollar bounced (and) the other thing is the GlobalDairyTrade auction. It was another weak auction which pretty much locks in the fact that the 2014/15 season is going to be a very hard one for New Zealand dairy farmers.
"The New Zealand dollar has been somewhat puzzlingly strong over the last couple of weeks as global commodities have declined," Tuck said. "This auction may remind markets that the New Zealand dollar is a commodity currency and our bellwether commodity, dairy, is still in decline."
Tuck said there were some small positive signs in the latest auction as the fixed contract for whole milk powder gained, skim milk powder stabilised, and upstream products such as butter, buttermilk, cheddar, milk fat and rennet casein improved, however that is unlikely to benefit farmers for the 2014/15 season.
The local currency may trade between 77.60 US cents and 78.40 cents today, according to ANZ.
Data on third quarter building work put in place will be released at 10:45am.
The New Zealand dollar slid to 92.26 Australian cents from 92.53 cents yesterday, dropped to 62.94 euro cents from 63.17 cents, declined to 49.81 British pence from 50.06 pence and fell to 92.90 yen from 93.24 yen.
BusinessDesk.co.nz
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