NZ dollar declines

New Zealand dollar 2The New Zealand dollar fell from its overnight highs against the greenback as dairy prices gained at the latest auction but on lower volumes.

It rose against its Aussie counterpart after the Reserve Bank of Australia kept its cash rate at a record low.

The kiwi traded at US68.81c as at 0800 in Wellington, having touched 69.07 cents late on Tuesday.

It rose to A90.43c from A90.21c.

The GDT price index rose 0.4 per cent in the latest GlobalDairyTrade auction, the first gain in five auctions, while whole milk powder climbed 1.7 per cent.

But overall volumes of product sold fell and the price gain may reflect concerns New Zealand production will be hampered by dry conditions over summer.

The kiwi gained on Tuesday after acting Reserve Bank governor Grant Spencer said in a speech the central bank was adopting a more flexible approach to inflation targeting, given persistently low inflation.

His Australian counterpart Philip Lowe also cited low inflation while keeping the cash rate at 1.5 per cent.

“We’re closely monitoring possible drought conditions developing in New Zealand, which could lead to higher pricing ahead, but at the expense of much weaker volumes,” Bank of New Zealand currency strategist Jason Wong said.

Spencer’s speech “revealed a slight hawkish bias, as implicit by the bank’s projected rate track at the last MPS”, he said.

The trade-weighted index was at 72.64 from 72.62.

With no economic data scheduled for release in New Zealand, traders are likely to keep an eye on gross domestic product for the third quarter in Australia, expected to show economic growth slowed to 0.7 per cent from 0.8 per cent.

The New Zealand dollar was little changed at 51.20 British pence from 51.19 pence and rose to 58.25 euro cents from 58.05 euro cents after figures showed European retail sales dropped 1.1 per cent in October versus expectations of a 0.7 per cent decline.

It was at 77.54 yen from 77.56 yen and fell to 4.5518 yuan from 4.5579 yuan.

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