By Rebecca Howard
Aug. 7 (BusinessDesk) - The New Zealand dollar remained under pressure after a soft dairy auction and ahead of the central bank’s rate decision.
The kiwi was trading at 65.28 US cents at 7:55 am in Wellington versus 65.29 cents at 5pm. The trade-weighted index was at 72.53 points from 72.54.
The New Zealand central bank is widely expected to cut rates by 25 basis points to a record low 1.25 percent as the global situation deteriorates and other central banks, like the US Federal Reserve, move to ease policy.
Weaker global dairy prices may have also weighed on the currency, with the GDT price down 2.6 percent. NZX dairy analyst Robert Gibson said, however, the slide is likely linked to a lift in the volume of product sold which was up nearly 40 percent on the previous event. This is fairly normal at this time of year as New Zealand milk supplies start to come online.
The US dollar also benefited from easing trade tensions when the People’s Bank of China on Tuesday set the daily currency fixing stronger than expected and said they don’t expect the yuan to weaken further.
“There’s a tentative risk-on theme,” said Kiwibank trader Mike Shirley.
However, the “kiwi unwound recent gains, despite a mild risk-on tone seeping back into markets as China looked to defuse trade tensions. A softer GDT auction was the main culprit, with whole milk powder prices falling sharply,” said ANZ Bank FX/rates strategist Sandeep Parekh.
The mood also lifted after US National Economic Council Director Larry Kudlow told CNBC that the US administration is still planning to host a Chinese delegation for talks in September.
The kiwi was trading at 96.55 Australian cents from 96.33 cents, slightly higher after the Reserve Bank of Australia yesterday held rates at a record low 1.0 percent but left the door open for more cuts.
“The board will continue to monitor developments in the labour market closely and ease monetary policy further if needed to support sustainable growth in the economy and the achievement of the inflation target over time,” governor Philip Lowe said in a statement.
The New Zealand dollar was at 53.65 British pence from 53.68, at 58.29 euro cents from 58.26, at 69.50 yen from 69.63 and at 4.5835 yuan from 4.5972.