US Dollar to New Zealand Dollar (USD/NZD) Exchange Rate Bullish; Dairy Prices Flop
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The US Dollar has been trading lower against other majors today as the US eagerly anticipates the results of the Federal Reserve’s Federal Open Market Committee (FOMC) which will discuss monetary policy. It is hoped that the US will gain some clarity regarding the possibility of interest rate hikes, which are currently hot topic in the currency market.
However, the ‘Buck’ has been able to climb against the New Zealand Dollar as New Zealand has seen surprising news on Tuesday. Speculation had already been circulating that the New Zealand dairy seller Fronterra, would cut the amount they pay dairy farmers; unfortunately the price cut has surprised, falling to far lower than expected.
The Wall Street Journal stated: ‘Fronterra has previously forecast it would pay $7 New Zealand Dollars per kilogram of milk solids—already sharply lower than the prior season’s forecast of $8.40 New Zealand Dollars. On Tuesday, however, Fronterra Chairman John Wilson said the current forecast reflected continuing volatility, with global dairy prices down 16% since the start of the season on June 1.’
The effect of such lowering will be substantial on the economy as dairy is New Zealand’s main commodity, causing an estimated loss of $4 billion New Zealand Dollars to the yearly farmer’s income.
Economist at Westpac Dominick Stephens stated: ‘Today’s announcement from Fronterra was lower than most in the market were expecting, and will come as a shock to farmers.’
Following such negative news the ‘Kiwi’ fell to its lowest point in over a month, with the possibility of the NZD to USD exchange rate to fall further following Wednesday’s FOMC meeting. The NZD to USD exchange rate is currently residing at 0.8509, close to the day’s low of 0.8504.
The US is awaiting July’s Consumer Confidence figures this afternoon, currently forecast to reach 85.4, up from June’s 85.2.
The US Dollar to New Zealand Dollar exchange rate looks set to continue to remain bullish as the ‘Kiwi’ struggles against this latest setback. However the US Dollar could be in a prime position to rocket in an upward trajectory if the data releases and Federal Reserve’s statements prove as positive as hoped.
The USD to NZD exchange rate is trending in the region of 1.1752.