NZ dollar gains on concerns over US economy

NZ dollar gains, shrugging off drop in dairy prices, as US dollar weakness prevails

By Tina Morrison

June 3 (BusinessDesk) - The New Zealand dollar rose even after dairy product prices unexpectedly fell in the latest GlobalDairyTrade auction, as the US dollar dropped on concern about weakness in the world's biggest economy.

The kiwi jumped to 71.73 US cents at 8am in Wellington, from 71.13 cents at 5pm yesterday. The trade-weighted index advanced to 74.90 from 74.68 yesterday.

The dollar index, which measures the greenback against a basket of currencies, fell after a report showed new orders for US factory goods unexpected declined in April, and following comments from Federal Reserve board member Lael Brainard that the US economy's recent poor performance might be more than transitory. Concern about weakness in the US economy overrode any concern about the weaker dairy auction, where average prices fell to their lowest in almost six years.

"Kiwi is higher because if the US dollar is going down, then clearly the kiwi/US must go up," said Imre Speizer, senior market strategist at Westpac Banking Corp in New Zealand. "We had another weak dairy auction but it didn't matter because it's all about the US dollar."

Dairy products are New Zealand's largest commodity export. At the overnight auction, the price for New Zealand's key product, whole milk powder, declined 3.1 percent to US$2,309 a tonne.

Today, traders will be eyeing ANZ Bank New Zealand's monthly commodity price index scheduled for release at 1pm.

The New Zealand dollar touched a four-month low of 64.13 euro cents, on optimism Greece would reach a deal with its creditors ahead of an International Monetary Fund payment due at the end of this week. A report showing Eurozone inflation increased 0.3 percent in May, after five months of weakness, also bolstered the euro. The kiwi was trading at 64.35 euro cents at 8am from 65.02 cents yesterday ahead of the European Central Bank monetary policy review today.

The local currency slipped to 92.27 Australian cents from 92.65 cents yesterday on expectations the Reserve Bank of Australia may be finished its easing cycle after it kept its benchmark interest rate at a record low 2 percent yesterday. Today, the focus will be on Australian first quarter gross domestic product data.

The kiwi advanced to 89.01 yen from 88.65 yen yesterday and was little changed at 46.75 British pence from 46.76 pence.

(BusinessDesk)

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