WSJ: NZ Dollar Down Late In Tandem With Equities Bonds Mixed
WELLINGTON (Dow Jones)--The New Zealand dollar was lower late Wednesday as risk aversion sparked similar losses in equities amid a dearth of market-driving news.
RBS currency strategist Greg Gibbs said the lack of local news or data left the Kiwi swinging to the tune of the euro and the Australian dollar.
"It's a bit of a passenger," Gibbs said.
Weaker equities were the main reason for the Kiwi's slide but a "dovish" statement from the Bank of Canada accompanying its fully expected rate hike also played its part, said Westpac markets strategist Imre Speizer.
The Bank of Canada's move to raise interest rates was largely priced in but "what wasn't priced in was the cautious statement that accompanied it," Speizer said.
A 3.6% fall in whole milk powder prices at dairy giant Fonterra's monthly internet auction did little to influence the currency. The fall was considered mild and came after prices have risen sharply in recent months. Financial markets have been watching the Fonterra auction because the dairy company is so influential for the economy, accounting for over a quarter of exports.
The Kiwi got mild support from the ANZ commodity price index which hit another record high in May, mainly driven up by dairy prices.
The ongoing strength in commodity prices will add to the view that the Reserve Bank of New Zealand will follow Canada's lead when it reviews the Official Cash Rate next week, economists said.
ANZ Bank economist Steven Edwards noted that commodity prices have increased by 30% over the past 12 months in New Zealand dollar terms.
Swap rates fell mildly in line with U.S. Treasurys and the move away from risk. "There were receivers around in the short part of the curve," said a Wellington-based trader. He said the bond market was quiet with prices mixed. Tuesday's Reserve Bank of Australia statement, "where they sat on the fence," gave the market little to feed on. He said traders had pared back any chances of another RBA hike this year.
-By Simon Louisson, Dow Jones Newswires; 64-4-471-5990; simon.louisson@dowjones.com
