NZD/GBP and NZD/USD Exchange Rates Firm
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Conversely, the ‘Kiwi’ is trending at 0.8446 versus the US Dollar (USD). Wednesday has seen the NZD to USD currency pairing trading between the ranges of 0.8421 and 0.8472.
The ‘Kiwi’ has slid in recent weeks since dairy giant Fronterra slashed their allowance to pay farmers more than expected; furthermore Fronterra have reduced the figure further this week from the previous $7 to $6 New Zealand Dollars per kg.
Economist at Westpac Anne Boniface commented: ‘The further dairy prices fall, the more difficult it is for prices to stage a rebound of the magnitude we have factored into our forecasts, particularly in the absence of usual catalysts such as drought, rocketing grain prices or some other disruption to the outlook for supply.’
However the fall in dairy prices is placing the commodity currency in a state of high volatility with fears shrouding the New Zealand economy surfacing.
Labour party spokesperson David Cunliffe commented: ‘Dairy prices have now collapsed 41% since February- that is an unmitigated disaster. Interest rates are rising and we’re going to get crunched- crunched in our businesses with higher borrowing costs and lower revenues. We’ve been expecting dairy to come off for a while, it’s come off a little bit quicker than the Treasury was predicting.’
Conversely, the New Zealand Unemployment Rate figures cast a positive outlook for the economy on Wednesday showing only 5.6% of the country were job seeking.
Economists had forecast a 5.8% figure in the second quarter, a dip from 5.9% in the first quarter.
Westpac representative Michael Gordon stated: ‘Today’s data will support the Reserve Bank’s intention to raise the OCR [official cash rate] over the next few years. However, they are unlikely to outweigh the ongoing drop in dairy prices in the RBNZ’s mind and nudge it out of its “period of assessment” any time soon.’
However, Employment Change figures reached lower than the expected 4.0%, instead only attaining 3.7% year-on-year in the second quarter.
Gordon continued: ‘the combination of weaker than expected employment and a lower than expected employment rate’ has caused perplexity in the currency market.
Although not as many positions were created as forecast, unemployment figures have seen their lowest level in the latter five years giving positive momentum for the unemployment market.
New Zealand Dollar Forecast
New Zealand will see the publication of House Price figures on Thursday which will be the last data publication for New Zealand for the week.
For now the New Zealand Dollar will be subject to fluctuations in the currency market such as the UK Bank of England interest rate decision on Thursday.
The GBP to NZD exchange rate presently resides at 1.9933, whilst the USD to NZD pairing is trending at 1.1840.