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New Zealand's main export falls in value as forecast; NZD ignores data and continues trending higher.
The latest fortnightly international dairy price auction 'fix' showed the price of New Zealand's most important export falling by an average of -0.6%.
The data is important for the New Zealand Dollar (Kiwi) as dairy products are New Zealand's main exports and increases in dairy prices tend to increase demand for the Kiwi and drive up its value.
The Global Dairy Trade Auction revealed that the price of New Zealand's single largest dairy export Whole Milk Powder fell -0.8%, to an average price of US$3,232 per metric tonne.
The auction held on, Tuesday, March 6, covered 10 different dairy products including Anhydrous Milk Fat, Butter Milk, Butter Milk Powder, Cheddar, Lactose, Rennet Casein, Skim Milk Powder and Whole Milk Powder - the headline decline was for the index or basket of all 10 goods.
The decline hardly affected the New Zealand Dollar (Kiwi) with NZD/USD moderating to 0.7303 from 0.7302, and GBP/NZD rising from 1.9028 to 1.9032 in the five minutes following the release at 15.15 GMT.
The lack of volatility was probably due to the results falling in line with existing bearish market expectations.
Dairy futures contracts had already indicated a probable fall in price before the release (although of a greater 2-3% degree), according to forexlive's Eamonn Sheridan, and the general outlook for global dairy prices is negative for the first six months of 2018 due to over-stocked inventories in Europe, so the results fell in line with market expectations.
"Dairy product prices are likely to decline during the first six months of 2018 due to increasing stocks of some milk products as well as reduced domestic use of dairy products occurs," says news website Wisconsin State Farmer, part of the USA Today network, adding:
"Bearish factors keeping futures prices in check continue to include the heavy inventories of dried milk products in inventory in the E.U. as well as the expected milk production increase this year in the European Union."
Despite the poor result the New Zealand Dollar continued trending higher against its major counterparts on Tuesday.
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