New Zealand dollar holds its ground ahead of dairy auction

The kiwi remained steady despite business confidence holding around an eight-year-low. Photo / File

The New Zealand dollar stuck to a very tight range, largely overlooking ongoing weakness in business confidence, ahead of the dairy auction tonight and key economic data over the next few days.

The kiwi traded at 69.93 US cents as at 5 pm in Wellington versus 70.10 late yesterday. The trade-weighted index slipped to73.79 from 73.98.

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The kiwi remained steady despite business confidence holding around an eight-year-low in the December ANZ Business Outlook survey. A net 38 per cent of businesses were pessimistic about the year ahead, versus 39 percent in the prior survey,

The kiwi didn't fall as the survey was "less bad," but it wasn't very positive either, said Mark Johnson, a senior dealer at OMF. Traders will be focused on the GlobalDairyTrade auction tonight, he said.

The threat of drought in New Zealand may push prices for whole milk powder higher while abundant supplies of skim milk powder in Europe could depress prices for that product, according to AgriHQ.

December whole milk powder futures contracts on the NZX are trading ahead of the last GDT auction price, signalling traders expect the price to rise 2.8 per cent at tonight's auction, AgriHQ said.

In contrast, the latest price of the December SMP futures contract indicates a 2.8 per cent fall at tonight's auction.

Investors will also be watching for the balance of payments for the third quarter and trade and migration figures for November tomorrow, followed by third-quarter gross domestic product on Thursday.

Globally, the US tax reform will remain in focus as markets wait to see if it is signed into law by President Donald Trump.

According to Reuters, the Republican-controlled U.S. Congress appeared all but certain to pass the legislation after two Senate Republican holdouts agreed on Monday to support the overhaul.

The kiwi dollar fell to 52.26 British pence from 52.56 pence yesterday and fell to 59.31 euro cents from 59.58 cents. It declined to 78.76 yen from 78.98 yen, fell to 91.27 Australian cents from 91.49 cents and to 4.6265 yuan from 4.6337 yuan.

New Zealand's two-year swap rate was unchanged at 2.18 per cent and the 10-year swaps were unchanged at 3.09 per cent.