New Zealand Dollar Weaker Late as Milk Prices Sour

 
   By Rebecca Howard 
 

        WELLINGTON, New Zealand--The New Zealand dollar was weaker late Thursday, after dairy prices fell to a six-year low in the overnight GlobalDairyTrade auction for July 1, an international trading platform established by New Zealand's Fonterra Co-Operative Group.
        The Kiwi is trading at five-year lows after the GDT Price Index, which covers a variety of products and contract periods in the auction, fell 5.9% from the previous auction on June 16. The average selling price was US$2,276 a metric ton. The average selling price for whole-milk powder was $2,054 a metric ton, down 10.8% from the previous auction.
        The GlobalDairyTrade auction is closely watched, as the GDT Price Index is widely considered a market reference price for dairy products.
        Dairy prices tend to have a direct impact on the dollar as the industry forms the backbone of New Zealand's economy, accounting for more than a quarter of exports.
        The New Zealand dollar was at US$0.6698 in late Wellington trading, compared with US$0.6797 late Wednesday. It was at A$0.8758 versus A$0.8808 previously.
        The weaker dairy prices coupled with a slide in business confidence this week led several economists to forecast the Reserve Bank of New Zealand would cut interest rates three more times this year.
        ASB Bank now expects the New Zealand central bank to cut its official cash rate a further 75 basis points this year, over the July, September and October meetings, to 2.5%. The main reasons: weakening business confidence, weak dairy auctions and a slower anticipated recovery in dairy prices, says ASB chief economist Nick Tuffley. He had previously anticipated just one additional rate cut, in July.
        The market will now look ahead to the U.S. jobs data, brought forward a day by Friday's Independence Day Holiday. Consensus is for headline non-farm payroll growth of 225,000.
        Write to Rebecca Howard at rebecca.howard@wsj.com; @FarroHoward
        (END) Dow Jones Newswires

        July 02, 2015 01:22 ET (05:22 GMT)

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