NZ Dollar Gains as Dairy Price Jump Cools RBNZ Rate Cut Bets

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NZ Dollar Gains as Dairy Price Jump Weighs Against RBNZ Rate Cut Bets
Yen, Euro May Weaken as Commodity Dollars Firm on Swelling Risk Appetite
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The New Zealand Dollar outperformed in overnight trade, rising as much 0.8 percent on average against its leading counterparts, after the average price at the Global Dairy Trade (GDT) auction jumped 10 percent, marking the fourth consecutive advance.

Dairy accounts for the lion’s share of New Zealand’s exports. A pickup in prices bodes well for producers’ earnings. Traders appeared to speculate that this will prove supportive for overall economic growth, weighing on RBNZ rate cut bets. Indeed, the Kiwi rallied alongside front-end bond yields.

The Australian and Canadian Dollars advanced as risk appetite firmed in Asian trade, offering support to the sentiment-linked currencies. The MSCI Asia Pacific regional benchmark equity index rose as much as 1.3 percent. The Japanese Yen likewise advanced after the Bank of Japan opted to keep monetary policy unchanged and offered no guidance pointing to on-coming stimulus expansion.

Looking ahead, a quiet economic calendar in European and US trading hours is likely to put sentiment trends in the driver’s seat. S&P 500 futures are pointing firmly higher, hinting a risk-on mood is likely to prevail. That may bode well for higher-yielding commodity bloc FX at the expense of funding currencies including the Yen and Euro.

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