The New Zealand dollar has fallen 15% against the greenback so far this year, reflecting weaker economic growth, falling dairy prices, lower interest rates and a pick up in the US. Photo / NZME.
The New Zealand dollar has fallen 15% against the greenback so far this year, reflecting weaker economic growth, falling dairy prices, lower interest rates and a pick up in the US. Photo / NZME.
The New Zealand dollar rose ahead of tonight's GlobalDairyTrade auction amid expectations whole milk powder prices may gain, boosting the outlook for the nation's key export commodity.
The kiwi increased to 65.66 US cents at 8am in Wellington, from 65.38 cents at 5pm yesterday. The trade-weighted index advanced to 70.69from 70.31 yesterday.
The local currency advanced following a gain in NZX whole milk powder futures contracts, suggesting the price for New Zealand's key export commodity may rise in tonight's GDT, following declines in 10 of the last 11 fortnightly auctions.
Since the start of the year, the price for whole milk powder on the GlobalDairyTrade platform has fallen by almost a third to US$1,590 a tonne.
That's prompted Fonterra Cooperative Group to cut its forecast payout to dairy farmers to below the cost of production and prompted some economists to revise down their expectations for economic growth in the coming year.
"The kiwi has outperformed everything overnight," said Tim Kelleher, ASB Bank head of institutional FX sales New Zealand. "The market is expecting that the dairy trade auction tonight will be more positive."
ASB expects whole milk powder prices to rally 10 to 15 percent overnight, based on futures pricing.
Traders may also be exiting short positions to realise profits this week given the currency has resisted moves below 65 US cents, said ASB's Kelleher.
The New Zealand dollar advanced to 88.99 Australian cents from 88.64 cents yesterday. Today, traders will be eyeing the release of the Reserve Bank of Australia's minutes to its last meeting to see if the bank makes mention of the Aussie dollar.
The local currency advanced to 59.26 euro cents from 58.95 cents yesterday, gained to 42.14 British pence from 41.78 pence, and rose to 81.67 yen from 81.31 yen.
