By BRIAN FALLOW economics editor
World prices for New Zealand's commodity exports strengthened last month and for a change the gain was not wiped out by a rising kiwi dollar.
ANZ's world commodity price index rose 1.2 per cent, aided by a 14.7 per cent rise in beef prices. That pushed the index to 8 per cent above its level of a year ago and to its highest level for nearly two years.
ANZ chief economist David Drage said that since the middle of August the New Zealand dollar had retraced some of its earlier gains, leaving it unchanged from July on a month-average basis.
So the NZ dollar commodity price index was also up 1.2 per cent for the month, but still 12.7 per cent lower than it was a year ago and 32 per cent below its peak in April 2001.
It was the first time in 10 months that commodity prices did not decline in NZ dollar terms.
The respite from a rising dollar could prove temporary, Drage warned.
The market's renewed interest in the United States dollar was built on a newfound enthusiasm for the US economic recovery, he said.
But faster growth in the US meant its current account deficit would keep widening, which implied further weakness in the US dollar ahead.
"We expect further gains in the New Zealand dollar will be moderate, though, compared with what we have seen," Drage said.
"While we believe within the next six months or so we will see the kiwi reach the 60c mark against the US dollar, we are expecting some retracement against other currencies, especially the Australian dollar - not that that does much for commodity exporters."
The ANZ index measures spot commodity prices at a spot exchange rate. Drage said the effects of the 32 per cent fall in New Zealand dollar commodity export prices between April 2001 and July 2003 had been muted by exporters' contractual arrangements with their buyers and foreign exchange hedging. These factors delayed the impact of the drop but its effects would continue to be felt for some time yet, he said.
Of the 13 commodities in the index, six rose last month - beef, wool, kiwifruit, aluminium, sawn timber and seafood.
Dairy products, logs and wood pulp were unchanged, and skins, apples, venison and lamb prices fell.
NZ's export prices starting to look a little brighter
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