WELLINGTON: The New Zealand dollar was little changed after dairy product prices jumped as expected at auction with the bounce already priced in.
The kiwi was at US65.84 cents at 8am on Wednesday in Wellington, from US65.89c at 5pm on Tuesday. The trade-weighted index edged lower to 70.96 from 71.04.
Dairy product prices jumped in Wednesday morning’s GlobalDairyTrade auction, rising for the first time in nearly six months after Fonterra cut back the volume of whole milk powder on offer by a third. Whole milk powder, New Zealand’s key export product, jumped 19.1 per cent to US$1856 a tonne.
“We are living in efficient markets and the NZX futures were telling you that this GDT auction was going to be a pretty decent bounce and markets have priced that in to kiwi over the beginning of this week,” said ANZ Bank New Zealand senior FX strategist Sam Tuck.
ANZ says dairy prices have now reached the bottom and lifted its forecast for Fonterra’s 2015/16 payout to farmers to between $3.75 to $4 per kilogram of milk solids, in line with Fonterra’s forecast of $3.85/kgMS.
Still, that remains below the cost of production, with Dairy NZ estimating $5.70/kgMS is the industry average breakeven point for most farmers.
“We are still seeing it as a loss-making season, which means it shouldn’t be overly good news for the New Zealand dollar,” Mr Tuck said. In New Zealand on Wednesday, data is scheduled for release on business prices for the second quarter.
On Wednesday morning, the New Zealand dollar advanced to 89.61 Australian cents from A89.48c cents on Tuesday, slipped to 42.03 British pence from 42.28p, gained to 59.68 euro cents from 59.59 cents and declined to 81.88 yen from 82.03 yen.
