Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


NZ Dollar Outlook: Kiwi may fall on prospects for milk price

NZ Dollar Outlook: Kiwi may decline as reduced dairy payout hurts sentiment

By Tina Morrison

May. 26 (BusinessDesk) - The New Zealand dollar may decline this week as weaker dairy prices are expected to see Fonterra Cooperative Group pull back its forecast payout to farmers.

The local currency may trade between 84.30 US cents and 86.50 cents this week, according to a BusinessDesk survey of 10 traders and strategists. Seven predict the kiwi will fall this week, while three expect it to increase. It recently traded at 85.32 US cents.

Reserve Bank governor Graeme Wheeler told a dairy farmers' conference in Hamilton this month that the local currency was overvalued and the central bank may intervene in the market to sell New Zealand dollars, should the kiwi remain high while commodity prices fall. Dairy prices at Fonterra’s GlobalDairyTrade auction declined for the seventh time in a row last week, fuelling speculation the world’s biggest dairy exporter will reduce its forecast payout to farmers on Wednesday following its monthly board meeting.

ANZ Bank New Zealand, the nation's largest rural lender, expects Fonterra may pull back its current forecast for a record payment of $8.65 per kilogram of milk solids by 20 to 30 cents and set its opening level for the coming season below $7 in response to the lower prices.

"The main theme this week will be the milk price payout which is a proxy for our global dairy industry," said Sam Tuck, senior foreign exchange strategist at ANZ in Auckland. "For the New Zealand dollar, it's not as good as we might have previously supposed so that might take a bit of the cream off the New Zealand dollar as well as the milk price."

The kiwi may test its support level of 85 US cents this week, which would mark its lowest level since the Reserve Bank started hiking interest rates in March, Tuck said. "Offshore markets are looking for reasons to sell New Zealand dollars," he said.

Still, the kiwi will probably continue to remain attractive to investors beyond this week because of its higher yield on the expectation the central bank will hike rates for a third time at its next review on June 12, and potentially leave the door open for another rise in July.

"We are not expecting it to fall out of bed," Tuck said.

The week will probably start on a quieter note as US financial markets are closed for the Memorial Day holiday today while the UK has a bank holiday.

This afternoon, the central bank will release its April data on low equity bank mortgage lending.

Tomorrow, the New Zealand Institute of Economic Research publishes its quarterly predictions. On Thursday, the Reserve Bank releases details of its foreign currency assets and liabilities for April, which would indicate if it has been active in the currency market, while Finance Minister Bill English will give a post-budget speech to the Hutt Valley Chamber of Commerce.

On Friday, April data on building consents and household credit are released while the ANZ publishes its latest business confidence survey.

Elsewhere this week, Japan will publish data on April inflation, the US has first quarter GDP, Australia has capital expenditure data, a key indicator of how the transition from mining investment to other forms of business investment is progressing, and China has manufacturing PMI.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Land & Water Forum: Fourth Report On Water Management

The Land and Water Forum (LWF) today published its fourth report, outlining 60 new consensus recommendations for how New Zealand should improve its management of fresh water and calling on the Government to urgently adopt all of its recommendations from earlier reports. More>>



Welcome Home: Record High Migration Stokes 41-Year High Population Growth

New Zealand annual net migration hit a new high in October as more people arrived from than departed for Australia for the first time in more than 20 years. More>>


Citizens' Advice Bureau: Report Shows Desperate Housing Situation Throughout NZ

CAB's in-depth analysis of over 2000 client enquiries about emergency accommodation shows vulnerable families, pregnant women and children living in cars and garages, even after seeking assistance from the Ministry of Social Development and Housing New Zealand. More>>


Speaking For The Bees: Greens Call For Neonicotinoid Pesticide Ban

The National Government should ban the use of controversial pesticides called neonicotinoids after evidence has revealed that even at low doses they cause harm to bee populations, the Green Party said today. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news