Currency: Dollar falls as dairy prices ease

The New Zealand dollar was testing support at US63.80c late today with dealers citing Fonterra's latest internet auction as a factor.

The NZ dollar was US63.79c at 5pm from US64.44c at the same time yesterday. It fell during the Wednesday night session and traded in a range between US63.79c and US64.16c during the domestic session, ending at the bottom of the range.

In the absence of other news and on a day in which the US dollar was firm dealers cited commodity prices as a factor in the currency market.

Overnight Fonterra's internet auction achieved an average price across all contracts and contract periods for whole milkpowder (WMP) of US$1829/tonne, down $57/tonne (or 3 per cent) from the June auction.

The auction was being reported as the local market came in. Later in the day the ANZ Commodity Price Index for June was published. It showed 0.2 per cent rise in the month but dairy prices fell 3.3 per cent. The index is down sharply from a year ago.

"The prices in the auction were lower than expected and the supposition that if the NZ dollar stays high the dairy payout will change was partly the reason," one dealer said.

The prospects of a significantly lower dairy payout appeared to have finally caught the attention of offshore players, ANZ said.

Large NZ dollar denominated bond maturities this month were yet another negative factor weighing on the NZ dollar.

"Throw in the fact that speculative positioning is significantly long in the NZD, and we wonder whether this is the long kiss goodnight and we are getting set for the roller coaster ride down."

There was more negative news for this part of the world when Australia posted its biggest trade deficit in 10 months in May. The deficit was double the April figure, and more than four times market expectations.

"Also we saw the US dollar a little stronger out here," one dealer said.

The NZ dollar was down to 0.4517 euro at the local close from 0.4592 yesterday, and was also down to 61.60 yen from 62.40.

Against the Australian dollar the NZ dollar fell to A79.30c at 5pm from A79.95c yesterday, while the trade weighted index fell to 60.16 from 60.89.

Currency rates:

5pm today 5pm yesterday

NZ dlr/US dlr US63.79c US64.44c
NZ dlr/Aust dlr A79.30c A79.95c
NZ dlr/euro 0.4517 0.4592
NZ dlr/yen 61.60 62.40
NZ dlr/stg 38.75 39.23p
NZ TWI 60.16 60.89
Aust dlr/US dlr 80.37c 80.55c
Euro/US dlr 1.4113 1.4032
US dlr/yen 96.60 96.82

- NZPA


- NZPA