New Zealand Dollar to Chinese Yuan Renminbi (NZD/CNY) Exchange Rate: Third Drop in Dairy Prices Weakens ?Kiwi? Further

A third drop in the GlobalDairyTrade Auction Winning Bid has seen the NZD/CNY exchange rate fall, despite a weak Chinese economy weighing heavily on the Yuan Renminbi. Dairy prices continue to cause ripples in the New Zealand economy.

<h2>NZD/CNY Exchange Rate Trending Down as Dairy Prices Experience Biggest Drop Since August</h2>

Yesterday’s GlobalDairyTrade auction saw dairy prices falling -7.9%, the third consecutive drop and the biggest decrease since the 4th of August.

All dairy products apart from butter saw a drop, with Whole Milk Powder falling -11.0% to US$2,148 per metric tonne, down from US$2,453.

The continued downtrend in dairy prices has increased the likelihood that the Reserve Bank of New Zealand (RBNZ) will have to cut interest rates in order to stimulate the economy.

The RBNZ has already reduced the cash rate three times within the last quarter, as second quarter expansion failed to hit the 0.6% growth forecast by the central bank.

The RBNZ had forecast annual growth to hit 3.3% through March 2016, but had to revise its estimate to 2.2% in September, with growth accelerating to a rate of 2.8% by March 2017.

The NZD/CNY exchange rate is currently trading in the region of 4.1120.

<h2>Chinese Yuan Renminbi Trending Up Despite Fears Over Slow Economic Growth</h2>

China has been experiencing a sustained period of economic slowdown which has impacted the Chinese Yuan Renminbi and caused ripples in the global market.

The bank base interest rate was cut by -0.25% to 4.35% in October – the sixth rate cut in a 12 month period – a move prompted by contractions in the Chinese economy, which has grown at its slowest quarterly rate for six years.

However, President Xi Jinping has dismissed fears, stating that the Chinese economy remains strong and continues to grow faster than the economies of countries in the West, despite the fact it is experiencing slowdown.

‘China's positive economic fundamentals and long term trajectory remain unchanged. China's economy has strong resilience, great potential and ample room for manoeuvring,’ Xi said today, while acknowledging the difficulties China’s economy is facing.

Weakness in the New Zealand economy has allowed the CNY/NZD exchange rate to appreciate and it is currently trending between 0.2413 and 0.2427.

<h3>NZD/CNY Exchange Rate Forecast: Strong US Data will Continue to Weaken New Zealand Dollar</h3>

The high risk ‘Kiwi’ (NZD) is susceptible to a strong US Dollar and housing market data is likely to have an impact on the New Zealand Dollar today.

Figures show that a better-than-forecast number of new projects received Building Permits and new mortgage applications rose 6.2% after falling last month.

The news has seen USD trending up against most of the major currencies after trader profit taking yesterday weakened the ‘Buck’ (USD).

With little important data due out from New Zealand or China this week any movement in the pairing is likely to come from further US data.

The release of the October Minutes from the Federal Open Market Committee could see strong movement for the US Dollar and therefore the New Zealand Dollar in negative correlation.

The NZD/CNY exchange rate is currently trending 0.1% up between 4.1100 and 4.1410.