NZ dollar recovers on weaker greenback, despite dairy price fall
The New Zealand dollar rebounded from overnight weakness as prices fell in the latest GlobalDairyTrade auction, with softer US data weighing on the greenback.
The kiwi slipped to a two-week low of 73.90 US cents overnight, and was trading at 74.44 cents at 8am in Wellington, from 74.75 cents at 5pm yesterday. The trade-weighted index fell to 78.25 from 78.47 yesterday.
Prices for dairy products, New Zealand's largest commodity export, declined an average 10.8 percent in the latest GlobalDairyTrade auction, amid concern about an increase in supply. Locally, Fonterra Cooperative Group is adding more volume to the auctions following higher-than-expected milk production, while overseas the removal of European milk quotas this month is expected to increase world milk supply. Still, movements in the greenback dominated currency markets, with weaker US jobs and manufacturing data stoking expectations that the Federal Reserve may hold off raising US interest rates until later in the year.
"Many would be forgiven for wondering why the New Zealand dollar is not lower after a double-digit price fall at the GlobalDairyTrade auction," ANZ Bank New Zealand senior economist Sharon Zollner and senior FX strategist Sam Tuck said in a note. "The answer is that US data still trumps domestic news for this cross, and last night ADP employment and the ISM (manufacturing index) missed expectations. This may keep a data-dependent Fed patient and US dollar bulls penned."
ANZ expects the kiwi to trade between 73.50 US cents and 75.50 cents today.
Traders will now be looking to tomorrow's US payrolls report, which is closely watched by the Fed. The ADP National Employment Report showed the US added 187,000 new jobs last month, below expectations of 225,000 and the first time it has printed below 200,000 in more than a year.
In New Zealand today, ANZ releases its commodity price index for March at 1pm and Auckland real estate agency Barfoot & Thompson may publish its latest housing market data this afternoon. Local markets are closed tomorrow and Monday for the Easter public holidays.
The New Zealand dollar was little changed at 97.92 Australian cents from 97.90 cents yesterday ahead of the release of Australian trade data today. In Australia, the focus is on the country's central bank meeting next Tuesday, with traders currently pricing in a 73 percent chance of a rate cut, according to the Overnight Index Swap Curve.
The kiwi slipped to 89.03 yen from 89.38 yen yesterday, weakened to 69.15 euro cents from 69.32 cents and was little changed at 50.20 British pence from 50.29 pence.