The New Zealand dollar continues under pressure as investors remain concerned about the impact of lower dairy prices on the economy and the cash rate.
Chris Hunter, Corporate Dealing Manager at Western Union Business Solutions, said there were some concerns that the GlobalDairyTrade auction would see prices fall further overnight. Dairy makes up around a third of New Zealand’s exports and a fall in prices has a direct impact on the country’s economy.
«There is also concern about what is going to happen at next Thursday at the RBNZ announcement. The market still seems to think it is a lock for an interest rate increase but the concern is what happens after this meeting and it seems the market has lost a bit of faith in the aggressiveness of the RBNZ’s increases over the coming year,» said Hunter.
In Wellington trading, the New Zealand dollar was at US$0.8467 from US$0.8507 late Friday in New Zealand. The market was closed Monday for a national holiday. It was at A$0.9131 compared with A$0.9125.
Mr. Hunter said that markets largely ignored data released Tuesday in both New Zealand and Australia — New Zealand terms of trade data, Australia current account numbers and the Reserve Bank of Australia decision– because it largely met expectations.
Westpac economist, Anne Boniface said, the «sky high» terms of trade would also likely moderate over the near term although Westpac remains optimistic that over a longer horizon the terms of trade will remain elevated relative to historical levels.
Source: WSJ