NZD/USD Fundamental Analysis – week of September 12, 2016 – Forecast

The NZD/USD closed out the week just a bit up after the US dollar reversed and gained. The kiwi looks to be a strong buy in the new week as traders are watching the local trade balance report. Chinese data was a bit disappointing with inflation missing but trade numbers showed a jump in imports and exports. The kiwi is trading at 0.7323 and is expected to rebound this week back to the 0.74 level.

The US dollar climbed for a third day while emerging market currencies from South Africa to Brazil to Mexico plunged as traders boosted bets on an interest-rate increase from the Federal Reserve later this month. A gauge of the greenback jumped after Fed Bank of Boston President Eric Rosengren warned that waiting too long to raise interest rates threatened to overheat the US economy and could risk financial stability.

The average price in the Global Dairy Trade auction overnight rose 7.7 percent to $US2920 a tonne. It followed two consecutive rises in the past month, with a 12.7 percent increase in prices at the most recent auction.

The important whole milk powder price rose 3.7 percent to $US2793 a tonne. The dairy futures market had been expecting another solid rise and whole milk powder was now at its highest level since October last year. Prices were not quite in the break-even range for farmers, who need about $3000 a tonne for whole milk powder.

Dairy co-operative Fonterra raised its forecast payout to farmers by 50 cents per kilogram of milks solids in August, taking the price to $4.75 for the current season. Analysts expect dairy prices to recover, but have warned dairy was volatile and the road to recovery may not be smooth sailing.

New Zealand importers and exporters are scrambling to find out how they will be affected after the world’s seventh largest shipping line went broke. Hanjin Shipping Co of South Korea filed for bankruptcy protection in its home country and the US last week, leaving 460,000 containers of freight potentially stranded. The value of this merchandise was put at $US14 billion by the Wall St Journal.

Hanjin has not come to New Zealand for several months but carries New Zealand merchandise which is on shipped from major ports like Singapore. The Shippers Council represents big exporters like Zespri, Fonterra and Enza, and its deputy chairman Murray Horne said the problem would be most serious for exporters using lines that have an alliance with Hanjin.

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This Week’s Economic Events That You Should Be Monitoring:

Government Bond Auctions

Date Time           Country               Auction

Sep 12 11:30 Germany Eur 2bn Mar 2017 Bubill

Sep 12 13:00 Norway Details of bond auction on Sep 14

Sep 13 11:00 Netherlands Eur 2-3bn 0% Jan 2022 DSL

Sep 13 11:10 Italy Holds bond auction

Sep 14 11:05 Norway Holds bond auction

Sep 14 11:30 UK 0.125% 2046 I/L Gilt

Sep 14 11:30 Germany Eur 1bn 2.5% Jul 2044 Bund

Sep 15 10:30 Spain Holds bond auction

Sep 15 11:03 Sweden Holds I/L bond auction

Sep 15 11:50 France Holds bond auction