NZ dollar falls vs. A$ after RBA tones down rhetoric; dairy auction looms
The New Zealand dollar fell against its trans-Tasman counterpart after the Reserve Bank of Australia toned down its rhetoric in calling its currency too high, and ahead of the latest Fonterra Cooperative Group dairy auction.
The kiwi fell to 88.70 Australian cents at 5pm in Wellington from 88.99 cents immediately before the announcement, and down from 88.92 cents yesterday. The local currency rose to 77.46 US cents at 5pm from 77.25 cents at 8am, though still lower than 77.61 cents yesterday.
The Australian dollar gained after RBA governor Glenn Stevens said the currency "remains above most estimates of its fundamental value, particularly given the further declines in key commodity prices in recent months", having previously characterised it as "high by historical standards." The RBA kept the key rate at 2.5 percent, and reaffirmed its intention to keep rates low to support economic growth.
"They're still talking about the Aussie currency as still too high, and was very similar to what the RBNZ said, in that their respective commodity prices have fallen," said Michael Johnston, senior trader at HiFX in Auckland. "The kiwi's range-trading with a downside bias."
The upcoming dairy auction on Fonterra's GlobalDairyTrade platform will be watched for any pick-up in global dairy prices, which the dairy exporter needs to maintain its forecast payout to farmers.
HiFX's Johnston said if that doesn't eventuate, it will weigh on the New Zealand economy, and should push down the kiwi dollar.
New Zealand's commodity prices fell in October for an eighth month, though there were signs of recovery in dairy prices, according to the ANZ commodity price index.
The local currency rose to 87.94 yen at 5pm in Wellington from 87.48 yen yesterday, and fell to 61.82 euro cents from 62.17 cents. It edged down to 48.41 British pence from 48.59 pence. The trade-weighted index declined to 76.31 from 76.48 yesterday.