SYDNEY: The New Zealand dollar may gain against its Australian counterpart on speculation a rebound in global dairy prices has reduced the chance for another rate cut, while the weaker outlook for iron ore prices could add to the case for lower rates across the Tasman.
The kiwi rose to 91 Australian cents at 5pm in Wellington from 90.84 cents on Friday in New York. It gained to 63.99 US cents from 63.61 cents at 8.30am, and from 63.84 last week.
Local economists are putting a lower probability on the Reserve Bank cutting interest rates again after Fonterra Cooperative Group, the world’s biggest dairy exporter, raised its forecast payout to farmers last week after a rebound in global dairy prices.
That’s in contrast to falling iron ore prices, driven by softening demand from Chinese manufacturers for Australia’s biggest export, and prompting Australia & New Zealand Banking Group economists to call for two more rate cuts across the Tasman. That’s seen the kiwi jump 2.7 percent against its Australian counterpart over the past week.
“The 55 percent increase in milk price (since mid-August) has taken the pressure off the RBNZ, and it could easily go on hold,” said Martin Rudings, senior foreign exchange dealer at OMF in Wellington. “All downside momentum has gone from the kiwi/Aussie cross – if we get up through 91.50 (Australian cents) it could go up to 93 before it stops.”
