Kiwi falls to 6-week low as FOMC looms, Fonterra hikes payout
The New Zealand dollar fell to a six-week low ahead of what is expected to be a rate hike by the Federal Reserve's policy committee tomorrow, which will highlight the disparity with the Reserve Bank's interest rate outlook.
The kiwi dollar fell to 71.79 US cents as at 8am in Wellington from 72.23 cents late yesterday. The trade-weighted index dropped to 74.02 from 74.31.
The Federal Open Market Committee is expected to raise the fed funds rate a quarter point to a range of 1.50 percent to 1.75 percent in an announcement set for early Thursday New Zealand time. That's likely to overshadow the New Zealand's Reserve Bank interest rate review expected to keep the official cash rate at 1.75 percent and signal no change on the immediate horizon. Most dairy product prices fell in the Global Dairy Trade auction overnight, while Fonterra Cooperative Group hiked its milk payout forecast while writing down its Beingmate investment.
"Ahead of the likely next hike from the FOMC, the USD strengthened against the entire G10," said Con Williams, rural economist at ANZ Bank New Zealand. "This pushed the NZD back down towards support around 0.7180. The data pulse today and a likely picture of solid farmer earnings is unlikely to be the catalyst to push the kiwi much lower until the new Fed Governor (Jerome) Powell declares his hand on how many hikes might be viewed as 'gradual' tightening."
In New Zealand today, migration figures for February are due out this morning and Fonterra Cooperative Group's interim results included an increase in the forecast farmgate milk price to $6.55 a kilogram of milk solids and an impairment on Beingmate of $405 million.
The local currency fell to 76.45 yen from 76.76 yen and fell to 51.26 pence from 51.45 pence. The kiwi traded at 58.59 euro cents from 58.50 cents, dropped to 93.44 Australian cents from 93.70 cents and fell to 4.5470 yuan from 4.5691 yuan.