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Free AccessKiwi Loses Altitude On Lead From Commodity Space
NZD/USD sold off sharply on Wednesday, finding support around $0.6244, as commodity markets weakened amid global recession fears. BBG Commodity Index plunged to its lowest point since April amid general aversion to take more risk.
- The rate got some reprieve in the London/NY crossover as U.S. Tsy yields extended their dip, which resulted in the widening of U.S./NZ 10-Year yield spread (already unwound this morning).
- Elsewhere, Fonterra hiked the mid-point of its farmgate milk price forecast for the 2022/23 season that started this month by $0.50 to $9.50/kg of milksolids. If this forecast is realised, it will be a new all-time high. And it would come on top of a record 2021/22 season, when the final price is expected to settle around NZ$9.30.
- The kiwi dollar has shown little reaction to these developments, as usual. While typically its initial reaction is limited, the chart below shows that there has been a degree of co-movement in NZD/USD and dairy prices in the medium term, particularly over the last two years or so.
- The rate last deals at $0.6287, little changed on the day. Losses past Jun 14 low of $0.6197 would signal potential for a move below $0.6000. Conversely, a rebound above Jun 16 high of $0.6396 would shift bullish focus to key resistance from Jun 3 high of $0.6576.
- The local economic docket is virtually empty during the remainder of the week.
Fig. 1: NZD/USD vs. New Zealand GDT Price Index vs. New Zealand GDT WMP (Whole Milk Powder) Average Winning Price
Source: MNI - Market News/Bloomberg
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