New Zealand Dollar to US Dollar Exchange Rate: NZD/USD Down in Risk-Off Environment

The high-risk New Zealand Dollar is currently trending down across the board as momentum builds towards a US December rate hike by the Federal Open Market Committee (FOMC). The NZD/USD exchange rate is down -1% today and key US inflation data due out tomorrow could compound losses.

NZD/USD Exchange Rate Forecast: Dairy Price Drop Weakens New Zealand Dollar

Dairy products are New Zealand’s largest exported commodity, accounting for around a quarter of the country’s total exports. Recent falls in the GlobalDairyTrade Price Index have had a significant impact upon the ‘Kiwi’, with the results of the 3rd November auction triggering a slide for the New Zealand Dollar against the major currencies.

Falling prices are just one of the concerns facing New Zealand’s dairy sector, as bad debts continue to grow. ‘We think dairy debt has increased by about NZ$3 billion ($1.96 billion) over the past 12 months and about half the dairy farmers are experiencing the second consecutive season of negative cash flows,’ Graeme Wheeler, Governor of the Reserve Bank of New Zealand (RBNZ), told reports recently.

The next dairy auction for whole milk powder will be held tomorrow. Another significant drop in prices will increase the likelihood that the RBNZ will have to consider measures to stimulate the economy and try and raise sluggish interest rates.
The NZD/USD exchange rate has experienced significant losses, trending down at a six-week low around 0.6482.

USD/NZD Exchange Rate Soars Amid Countdown Towards Fed Rate Decision

The huge jump in employment highlighted by the US Non-Farm Payrolls on the 6th of November saw the ‘Greenback’ soar against the major currencies. The ‘Kiwi’ has been unable to recover much ground since, failing to get above 0.6584, even though the huge growth saw fears that overvaluation of the ‘Buck’ could end up hindering US economic progress.

Since the Non-Farm Payrolls, Advance Retail Sales have risen 0.1%, Business Inventories have climbed 0.3% and the University of Michigan Confidence Index has risen from 90 to 93.1. With each positive data release, the argument against a December Fed rate hike gets weaker. The likelihood of a rate hike is currently 70% and could grow even higher if tomorrow’s Consumer Price Index prints positively.

The USD/NZD exchange rate is currently trending up 1% between 1.5279 and 1.5437.

NZD/USD Exchange Rate Forecast: US Dollar Bullish Charge Likely to Continue, New Zealand Dollar Could Continue Falling

Although the crisis in the Eurozone has been the centre of attention for the past few days, investor focus is beginning to turn to the US, with one month to go until the FOMC meets to decide its monetary policy for the final time this year. Fed hawks were indicating that it was time for a rise in interest rates even before the recent positive data releases from the US, including the massive Non-Farm Payroll report.

The Reserve Bank of New Zealand 2-Year Inflation Expectation report is due out tomorrow. Considering the large impact falling dairy prices have already had, any indication of a change in direction for monetary policy could have a significant impact upon the ‘Kiwi’.

The US Consumer Price Index is expected to post a 0.1% rise this month. Evidence that inflation is growing is one of the main criteria Fed doves have been holding out for, so it will be interesting to see how this result affects the outlook of FOMC policymakers in the run-up to the key interest rate decision.

The NZD/USD exchange rate is currently trading between 0.6470 and 0.6544.