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Dollar falls to six-month low before dairy auction

Whole milk powder futures suggest a drop in the price of the commodity.

Jonathan Underhill
Tue, 20 Dec 2016

The New Zealand dollar dropped to a new six-month low ahead of tonight's dairy auction, which may see prices little changed, as traders became more risk averse in subdued pre-Christmas trading.

Traders say whole milk powder futures suggest a decline in the price of the commodity in the auction.

The kiwi traded at 69.27USc as at 8.30am in Wellington and earlier touched 69.22USc, the lowest since June, from 69.79USc late yesterday. The trade-weighted index fell to 77.26 from 77.58.

While indicators of the New Zealand economy are upbeat and speculation is growing that the Reserve Bank will begin raising interest rates toward the end of 2017, the local story has been trumped by a buoyant US dollar, thanks to US president-elect Donald Trump's promises to cut taxes and spend more.

The US Federal Reserve is also expected to raise interest rates faster than the market expected. The US dollar index picked up after Fed chairwoman Janet Yellen noted the strength of the US labour market.

The NZD and AUD remained under pressure during a mostly quiet session for global markets," Westpac Banking Corp senior markets strategist Imre Speizer says.

"Momentum remains negative, thanks to the post-FOMC surge in the US dollar last week," he says, adding the next "major multi-day target" for the kiwi dollar is about 68USc.

The kiwi traded at 95.5A c from 95.64Ac late yesterday. The local currency slipped to 4.8182 yuan from 4.8462 yuan and declined to 81.31 yen from 81.96 yen. It traded at 66.66€c from 66.71€c and was little changed at 55.91 British pence.




Jonathan Underhill
Tue, 20 Dec 2016
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Dollar falls to six-month low before dairy auction