The New Zealand dollar fell below 70 US cents, reaching an eight-week low on expectations of Federal Reserve rate hikes starting this month and ahead of a dairy auction that the futures market is predicting will see prices fall.
The kiwi dollar traded at 69.95 US cents as at 8am in Wellington, having fallen to 69.84 cents, the lowest since January 12, from 70.11 cents late yesterday. The trade-weighted index fell to 76.59, the lowest since last October, from 76.74.
NZX dairy futures are pointing to an 8 per cent decline in whole milk powder at tonight's GlobalDairyTrade auction, in the second straight decline, after improved weather conditions prompted Fonterra Cooperative Group to increase the amount of product it's offering in coming auctions on the GDT platform by about 25,000 tonnes. The kiwi was already in retreat after Federal Reserve chair Janet Yellen indicated rate hikes would likely start this month, while reports that North Korea fired four missiles into the sea off Japan also sapped risk appetite.
"An expected chunky fall in dairy prices in the GDT auction tonight isn't helping sentiment," said Jason Wong, currency strategist at Bank of New Zealand. "A mild risk-off tone has pervaded the market as investors ponder the outlook under a Fed plan to step up the pace of monetary policy normalisation."
Ahead of tonight's dairy auction, Reserve Bank deputy governor Grant Spencer is scheduled to give a speech today at 11am titled 'Review of
Bank Capital Requirements'. Also out today, the Reserve Bank of Australia releases a statement on its review of interest rates this afternoon, although no change is expected.
The New Zealand dollar fell to 92.26 Australian cents, having earlier touched 92.07 cents, the lowest since May last year, from 92.54 cents late yesterday. The local currency traded at 57.13 British pence from 57.05 pence and was at 66.07 euro cents from 66.09 cents. It dropped to 79.69 yen from 79.79 yen and fell to 4.8234 yuan from 4.8336 yuan.