NZ dollar holds below 85 US cents as dairy auction looms
By Jonathan Underhill
Aug. 18 (BusinessDesk) - The New Zealand dollar was little changed below 85 US cents as a lack of local data had traders watching geopolitical tensions in Ukraine and the Middle East while awaiting the next GlobalDairyTrade auction to see if dairy prices will continue to slide.
The kiwi traded at 84.98 US at 5pm in Wellington, from 84.88 cents at 8am and from 84.82 cents on Friday in New York. The trade-weighted index was at 79.62, little changed from last week.
Price of dairy products dropped to their lowest levels since October 2012 in the last auction two weeks ago, and have declined in 11 of the past 12 sales. Whole milk powder futures fell today on the NZX, suggesting the slide may not have finished yet. Results of the latest auction are posted in the early hours of Wednesday, local time. Global risk appetite has fallen with news that Ukraine attacked an armoured Russian convoy taking aid to separatist rebels.
"For the moment, geo-politics will dominate the direction of the kiwi," said Mark Johnson, a senior dealer at OMF. On the decline in dairy prices, "it's hard to see the trend changing, but I suspect the rate of change will slow."
He said support for the kiwi comes in at between 84 US cents and 84.20 cents, as traders look to pick up a relatively high-yielding currency on dips. Resistance is at 85.20 cents, he said.
Traders will also be watching the release tomorrow of the government's pre-election fiscal and economic update, which will give the last view of the projected 2014/15 fiscal surplus before the Sept. 20 election.
The kiwi traded at 86.92 yen from 86.99 yen last week, and was little changed at 91.11 Australian cents. It traded at 63.42 euro cents from 63.50 cents, and was at 50.78 British pence from 50.84 pence at the end of last week.