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The New Zealand dollar touched a nine-week low against the yen and weakened against the greenback after dairy product prices extended their slide in the latest GlobalDairyTrade auction and traders awaited a meeting of the Bank of Japan.
The kiwi touched 86.59 yen early this morning, its lowest since March 17, and was trading at 86.83 yen at 9:55am in Wellington, from 87.46 yen at 5pm yesterday. The local currency touched a three-week low of 85.57 US cents and was recently trading at 85.69 cents from 86.15 cents yesterday.
Risk aversion returned to markets overnight, as US equities fell and the yen advanced. The kiwi also fell after Fonterra Cooperative Group's latest fortnightly GlobalDairyTrade auction recorded its seventh consecutive decline overnight.
Weaker prices at the Fonterra auction "adds to a broader picture that we have been seeing the Reserve Bank of New Zealand talking about, i.e. terms of trade start decreasing and when that does start happening we should start seeing the kiwi come off from recent highs," said Stuart Ive, senior client adviser at OMF. "There's some risk off coming in. We could continue to drift down.
"If we do start seeing a prolonged downturn in stock markets, there is every chance that we could see risk currencies pull back from recent highs."
The kiwi may track sideways until the Bank of Japan announcement this afternoon, and investors will probably sell should it rally up to 87.20 yen, OMF's Ive said. Economists aren't expecting any change to policy at today's meeting.
New Zealand's monthly visitor arrivals and migration statistics are scheduled for release at 10:45am today while credit card spending figures are due out at 3pm.
The New Zealand dollar touched a two-week high of 92.77 Australian cents overnight, and recently traded at 92.72 cents at 8am from 92.65 cents yesterday.
Australia's currency weakened after the Reserve Bank of Australia's minutes from its last meeting, published yesterday, showed the central bank is likely to maintain record-low interest rates while the bank's assistant governor financial markets Guy Debelle "jawboned" the currency lower, noting that lower capital inflows may result in a lower Australian dollar.
Meantime, iron ore, Australia's biggest export earner, fell to its lowest since 2012 amid expectations a slower Chinese property market will crimp demand for steel.
Also weighing on the Aussie are concerns Standard & Poor's may cut its credit rating for the country after an analyst was quoted in the Australian Financial Review saying it may "reconsider" Australia's AAA rating unless substantial cuts are made to the deficit in coming years. S&P later clarified the comment, to the Guardian newspaper, saying its long-term view was that Australia had a "stable outlook", meaning there is less than 33 percent chance that the country's coveted AAA-rating will be downgraded in the next two years and the rating is not at risk.
The kiwi slipped to 62.57 euro cents from 62.82 cents yesterday and weakened to 50.91 British pence from 51.22 pence. The trade-weighted index touched a three-week low of 79.75 overnight and was at recently at 79.86 from 80.20 yesterday.