NZ dollar falls as Fonterra cuts forecast, US tax reform seen stoking greenback repatriation
By Paul McBeth
Dec. 7 (BusinessDesk) - The New Zealand dollar fell as Fonterra Cooperative Group cut its forecast farmgate payout on
weak global dairy prices, while the greenback was buoyed by the prospect of major US tax reform triggering the
repatriation of US dollars.
The kiwi declined to 68.76 US cents as at 8am in Wellington from 68.96 cents late yesterday. The trade-weighted index
decreased to 72.73 from 72.83 yesterday.
Fonterra lowered its forecast payment to farmers by 35 cents to $6.40 per kilogram of milk solids, matching economists'
expectations for a reduced payout after several subdued auctions on the GlobalDairyTrade platform. The world's biggest
dairy exporter blamed volatility in global prices for the decline with increased production in Europe, and also trimmed
its forecast milk collection for the 2018 season. New Zealand property values also crept up in the latest Quotable Value
figures today.
Meanwhile, the US dollar index increased 0.2 percent after private payrolls figures met expectations and amid growing
optimism US legislators will pass major tax reform which Bank of America estimates will trigger a rally in the greenback
next year as funds held overseas are repatriated back to the US.
"The fact the kiwi is hanging in there despite a stronger USD may reflect Fonterra’s downgrade perhaps not being as
large as feared and also better QV house prices," ANZ Bank New Zealand senior economist Phil Borkin said in a note. "It
highlights a reasonable base of support at present."
Local data today include the September quarter wholesale trade figures, while the government is expected to release the
briefings to incoming ministers from various departments.
The kiwi dollar rose to 87.94 Canadian cents from 87.54 cents yesterday after the Bank of Canada kept its benchmark
interest rate at 1 percent and said it would adopt a cautious approach in future reviews.
The local currency was little changed at 90.89 Australian cents from 90.93 cents yesterday after figures showed
Australia's economy grew at a slower pace than expected, and ahead of trade data across the Tasman today.
The kiwi dollar traded at 51.39 British pence from 51.32 pence yesterday and 58.31 euro cents from 58.22 cents as the
UK's negotiations with the European Union over its exit from the regional bloc remain tense.
The local currency slipped to 77.15 yen from 77.37 yen yesterday and fell to 4.5475 Chinese yuan from 4.5617 yuan.
(BusinessDesk)
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