LONDON: The New Zealand dollar has jumped more than 2 cents against the US dollar after hitting a four-year low overnight.
The kiwi dropped to US71.76c, its lowest mark since March 2011, shortly after 9pm last night after the Reserve Bank of Australia (RBA) cut its interest rate yesterday. from 2.5 per cent to a record low 2.25 per cent to try and lower the Australian dollar.
New Zealand’s official cash rate is 3.5 per cent.
The RBA cut its rate to support the Australian economy, which is weighed down by slowing growth, low commodity prices and sluggish business investment.
This morning, however, the kiwi received a boost from the GlobalDairyTrade auction, which saw an overall price increase of 9.4 per cent as whole milk powder prices jumped by more than 19 per cent.
The dollar rose US2.5c to a day’s high of US74.32c at 7.30am before slipping to US73.7c three hours later.
Dairy is New Zealand’s biggest export. Any change in the price of raw dairy commodities, such as milk powder, has a flow-on effect for the economy and the value of the dollar.
The kiwi rose more than a cent against the aussie since the RBA announcement to a high of A94.77c, its highest level in over a fortnight.
CMC Markets New Zealand general manager Chris Smith said the New Zealand dollar had been oversold yesterday and as a result its value fell lower than it should have, although he was surprised at the strength of the rally that followed.
“The market did think we would have a better dairy auction but it was surprised at how strong the rise in whole milk powder was. Whole milk powder makes up more than half our dairy exports so it is a positive for the New Zealand economy,” Smith said.
