NZ dollar falls in subdued trading as dairy auction looms
By Jonathan Underhill
Feb. 20 (BusinessDesk) - The New Zealand dollar fell in subdued trading with public holidays in the US and China as traders await tonight's dairy auction and minutes from the Reserve Bank of Australia's last policy meeting.
The kiwi traded at 73.71 US cents as at 8am in Wellington from 73.98 cents late yesterday The trade-weighted index dropped to 75.40 from 75.60.
Price expectations for tonight's GlobalDairyTrade auction range from little changed to a modest increase. Prices have strengthened in the three auctions so far this year, stoking confidence that Fonterra Cooperative Group will meet its forecast milk payout of $6.40 per kilogram of milk solids. But with rain returning to many parched farming areas, milk volumes are picking up and supply issues are abating.
"The GDT dairy auction overnight has more potential to cause movement if it was substantially different from indicators and our expectation of a flat to small rise," said Doug Steel, senior economist at Bank of New Zealand, in a note. The recent performance of manufacturing and services (PMI and PSI) surveys are "consistent with the slowing in near-term GDP growth that we anticipate."
The BNZ-Business NZ performance of services index, out yesterday, fell 0.2 points to a seasonally adjusted 55.8 last month. The PSI followed the PMI survey on Friday, which showed manufacturing activity rose 4.5 points to a seasonally adjusted 55.6 in January.
The kiwi fell to 59.38 euro cents from 59.55 cents after data showed the euro area's current account surplus widened to 3.5 percent of gross domestic product in 2017 from 3.4 percent a year earlier.
"Given that balance of payments backdrop, solid growth momentum and firming forward guidance from the ECB, the backdrop for the euro remains encouraging and sell-offs should be limited," said Sharon Zollner, chief economist at ANZ Bank New Zealand, in a note.
The New Zealand dollar traded at 93.14 Australian cents from 93.27 cents ahead of today's RBA minutes, which are likely to underline recent statements that interest rates are on hold for now.
The kiwi dollar traded at 52.62 British pence from 52.67 pence and rose to 4.6760 yuan from 4.6925 yuan. It fell to 78.55 yen from 78.65 yen.