Kiwi slides with weaker dairy prices

The New Zealand dollar has dropped as declining dairy prices raise concern about the country’s biggest export commodity and fuel speculation the Reserve Bank might not hike interest rates as aggressively as expected.

 
 

The kiwi traded at 85.47 US cents at 5pm in Wellington from 85.58 cents at 8am, down from 86.02 cents on Wednesday.

The trade-weighted index dropped to 79.97 from 80.37 on Wednesday.

Traders are questioning whether the Reserve Bank will raise the official cash rate as quickly as anticipated this year after dairy prices extended their decline at Wednesday’s GlobalDairyTrade auction.

“It puts pressure on the kiwi because people get the sense the Reserve Bank might scale back its rate hike programme,” said Imre Speizer, market strategist at Westpac Banking Corp in Auckland.

“The risk is the OCR track gets downgraded and the market knowing that is happy to sell the kiwi tso some extent.”

The kiwi declined to 92.69 Australian cents from 93.06 cents on Wednesday, to 62.12 euro cents from 62.31 cents and to 88.87 yen from 89.30 yen.

 
 

 
[vivafbcomment]