NZ dollar lifts after prices rise at GlobalDairyTrade auction

Wednesday 6th April 2016

The New Zealand dollar rose after prices gained at the overnight GlobalDairyTrade auction, stoking optimism about the outlook for the country's largest export commodity.

The kiwi initially declined ahead of the dairy auction, slipping from 68.01 US cents at 5pm in Wellington yesterday to 67.67 US cents by 2am ahead of the release of the auction result before rebounding to 68.02 cents by 3am. It traded at 67.92 cents at 8am. The trade-weighted index advanced to 72.06 from 71.93 yesterday.

The kiwi strengthened after dairy product prices for the second time in the seven auctions held so far this year. The GDT price index rose 2.1 percent, while the average price for whole milk powder, New Zealand's key product, rose 1.5 percent to US$2,013 a tonne.

"While the lift in dairy prices was broadly in line with futures market pricing, the New Zealand dollar still reacted, rising around a third of a cent against the US dollar," Westpac Banking Corp New Zealand senior economist Anne Boniface said in a note.

"Although last night's lift was small, any improvement in prices will be no doubt be welcomed by the embattled dairy sector," Boniface said. "However, while there are a few straws in the wind suggesting that the pace of growth in production in Europe has eased a touch in recent months and sentiment in commodity markets has noticeably improved in recent weeks, a substantive recovery in prices is likely to be some way off yet. We expect prices to continue to bump around near current levels, before gradually grinding higher late from late 2016 as global supply growth moderates and demand improves."

In New Zealand, state-owned Quotable Value is due to release its March housing data at midday.

The New Zealand dollar advanced to 90.10 Australian cents from 89.31 cents yesterday, gained to 47.97 British pence from 47.70 pence. It fell to 74.90 yen from 75.40 yen, edged lower to 59.63 euro cents from 59.70 cents, and was little changed at 4.3985 yuan from 4.3988 yuan.

BusinessDesk.co.nz

Comments from our readers

No comments yet