Dollar gains vs. Australian dollar on iron ore weakness; Yellen awaited
Kiwi rose to 97.13 Australian cent as at 5pm in Wellington, from 96.98 cents yesterday.
Kiwi rose to 97.13 Australian cent as at 5pm in Wellington, from 96.98 cents yesterday.
The New Zealand dollar gained against its Australian counterpart on sliding prices for iron ore exported to China, that nation's biggest market, while traders await a speech by US Federal Reserve chair Janet Yellen on Friday in the US.
The kiwi rose to 97.13 Australian cent as at 5pm in Wellington, from 96.98 cents yesterday. It was little changed at about 75.80 US cents.
Iron ore sank to a record low US$54.20 a tonne this week and has more than halved in the past 12 months amid a supply glut, according to Reuters, which reported today that capacity utilisation rates at small Chinese iron ore mines fell as low as 20 percent at the end of last year. Concern about weak iron ore prices weighed on the Australian dollar and also restrained the kiwi against the greenback, traders said.
The drop in iron ore "is weighing on the Aussie, given that it's a key export," said Michael Johnston, senior trader at HiFX. "It is symptomatic of a slowdown in China."
He said fair value for the kiwi against the Australian dollar "is a good chunk lower than where we are now" but the two currencies could still get to parity "given the Reserve Bank of Australia is cutting rates and the RBNZ is firmly on hold."
Traders are awaiting Yellen's speech tonight at the Federal Reserve Bank of San Francisco Conference on "The New Normal for Monetary Policy" for clues to the thinking of the central bank in the world's biggest economy.
"Her comments have been pouring a bit of cold water on imminent US rate hikes," Johnston said. Even so, "the US is still going to raise rates" and US dollar strength "is going to be the dominant trend in the medium term."
The trade-weighted index rose to 79.16 from 79.03 yesterday. The kiwi gained to 51.03 British pence from 50.92 pence yesterday, and rose to 69.67 euro cents from 69.04 cents. It was unchanged at 90.43 yen.
(BusinessDesk)