The results of the highly anticipated April 5th global dairy trade session has finally been released, and prices have shown their largest jump since December 2015.
While still well down on 2015’s already poor price levels (with average prices currently at $2,188), the 2.1% rise in the average dairy price has seemingly eased some investor fears towards the ‘Kiwi’ as the AUD/NZD dropped in response and at the time of writing trades almost -0.7% lower.
Investors may have been easily swayed to NZD despite ‘Panama Papers’ concerns amid poor key Australian data and the RBA’s ‘Aussie’ concerns.
The Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate fluctuated with great volatility during Tuesday’s session as investors couldn’t decide on which of the commodity currencies they disliked more amid poor data and #PanamaPapers scandals.
Tuesday afternoon saw the Reserve Bank of Australia (RBA) deliver its highly anticipated interest rates decision and investors seem unsure of how to react to the ‘Aussie’ in its aftermath.
The AUD/NZD has fluctuated significantly within the last twelve hours, moving between highs of 1.1188 and lows of 1.1090.
These violent shifts are thought to be due to both the ‘Aussie’ and ‘Kiwi’ experiencing a sudden barrage of bad news.
AUD weakness has been influenced by negative domestic data, with Monday’s disappointing retail sales print of 0.0% being followed by a series of poor releases on Tuesday.
Not only did Australia’s services index experience a contraction from 51.8 to 49.5, but Australia’s trade balance, despite forecasts that the deficit would improve to -2500m, has actually worsened from -3156m to -3410m.
The cherry on Australia’s bad news cake was the RBA’s interest rate statement. As well as leaving the benchmark rate at a record low 2.00% for the 11th month in a row, the central bank also expressed warnings of the Australian Dollar’s current overvaluation – possibly a sign that rates could be cut again down the line.
The ‘Aussie’ does seem to have the advantage for the moment as the ‘Kiwi’ appears unable to maintain any rallies.
New Zealand has perhaps been pelted with worse news than Australia. With investors already anxious about the imminent update on New Zealand’s milk commodity issue, the ‘Kiwi’ seems to have taken further hits as a result of the ‘Panama Papers’ scandal that burst onto the scene this week.
The leak details the methods that various members of the societal and governmental elite have taken in order to hide their vast amounts of wealth and avoid official taxation. Unfortunately for the ‘Kiwi’, one of the alleged ‘tax havens’ where the wealthy have hid their money is New Zealand.
With public tensions already high on the possibility of the wealthy not being taxed properly, outcry towards these ‘tax havens’ is largely negative, and New Zealand’s general sentiment seems to have taken a considerable hit.
This unfortunate factor hurting the ‘Kiwi’ comes alongside the general risk-off attitude caused by the leak. Investors are seeking ‘safe haven’ currencies like the US Dollar and Japanese Yen while the situation unfolds to avoid losses on volatile currencies and currency pairings.
With both currencies reeling from data and the ‘Panama Papers’ leak, volatility between them has quickly soared and fluctuations have become significant.
The New Zealand Dollar may well be dealt a blow that outclasses ‘Aussie’ weakness if news on its primary commodity export, powdered milk, comes in negatively.
The latest New Zealand Dairy Auction will show whether prices have fallen or rebounded. As the commodity has experienced a long period of price struggle, signs that recovery is still far off could knock even more confidence from ‘Kiwi’ investors and have the AUD/NZD pair climb again despite considerable blows to the ‘Aussie’.
Although RBA Economic Assistant Governor Christopher Kent is due to speak in Hobart on Wednesday, which may offer more insight towards the central bank’s monetary attitude going forward, Australian ecostats are in short supply.
Failing that, developments in the ‘Panama Papers’ situation is likely to inspire movement in ‘Kiwi’ investors.
At the time of writing, the Australian Dollar to New Zealand Dollar (AUD/NZD) exchange rate currently trends around 1.1130 while the New Zealand Dollar to Australian Dollar (NZD/AUD) exchange rate trends in the region of 0.8980.
Disclaimer: Currency-Converter.com.au and its data provider, TorFX, make no claims regarding the validity or exactness of the information provided in on this site and will not be held liable for any use, interpretation, or other implementation of the information provided. Currency-converter.com.au make no warranties, express or implied, as to results to be obtained from use of such information, and make no express or implied warranties of condition, quality, performance, merchantability or fitness for a particular purpose or use. Currency-converter.com.au shall not have any liability for the accuracy of the information contained in the services provided or ommissions there in which are made available on a free, as-is basis. None of the aforementioned parties shall be liable for any third party claims or losses of any nature, including, but not limited to, lost profits, punitive, consequential, special, incidental, indirect or similar damages even if advised of the possibility of such damages. Rates offered are interbank rates and may not be the same as offered by your financial institution, and do not include commissions. Rates shown on this site will vary from those provided by TorFX or other providers linked to from this site.