We have been warning for a while that the New Zealand Dollar was becoming more volatile, exhibiting some of the price action which characterized it in early December when it would regularly swing from being the day’s strongest currency to the very worst. For two of the last three trading days it has been top of the performance table even though there has been a complete absence of domestic economic or political news to drive the currency. Overnight, NZD/USD has extended recent gains to a fresh 12-week high of 0.7188 whist AUD/NZD is at 1.0925 having at one point on Monday fallen to 1.0918; its lowest since December 18th.
We haven’t had any fresh economic news but yesterday we did get the usual detailed and always fascinating annual summary of the past 12 months and 3-month weather outlook from New Zealand’s National Institute of Water and Atmospheric Research. Obviously for an economy so dependent on farming, forestry and agriculture the weather forecast is massively important. NIWA reported that 2017 was “a year of extremes” with New Zealand recording its fifth warmest year in more than a century. Annual rainfall was above normal across the country and for some regions including Auckland, Waikato and coastal Canterbury, as much as 149% higher.
Only the years 2016, 2013, 1999, and 1998 were warmer than 2017, whilst the nationwide average temperature was 13.1°C or 0.5°C warmer than average. The ‘Tasman Tempest’ in March and cyclones Debbie and Cook in April contributed to record or near-record rainfall yet by the end of 2017, 11 out of New Zealand's 16 geographical regions were experiencing meteorological drought and it was the second warmest December on record. For the 3 months January - March 2018, temperatures are forecast to be above average, with high confidence for all regions of New Zealand. Rainfall totals are most likely to be in the above normal range in the North Island and about equally likely to be near normal or above normal in the South Island.
The Kiwi Dollar opens in Europe this morning at USD0.7185 with AUD/NZD at 1.0925 and GBP/NZD1.8880.