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    Kiwi currency drops 40 pips after GDT dairy auction shows a 4.3% price decline

    by VT Markets
    /
    Sep 2, 2025
    The GDT price index in New Zealand has dropped by 4.3%. The New Zealand dollar has lost 40 pips today, and the fall in dairy prices could worsen the situation. The average dairy price is now $4043, with whole milk powder down by 5.3%. This situation could affect New Zealand’s economic outlook.

    Bearish Signals In The Dairy Sector

    There’s a clear bearish signal with the Global Dairy Trade price index down 4.3%. This decrease lowers the average price to $4043, confirming a decline in our main export sector. The quick 40-pip drop in the kiwi is a direct response we expect will continue. This decline isn’t happening alone; recent data for the second quarter of 2025 shows a 6% drop in dairy imports from key Asian markets. This decline likely indicates weaker global demand, putting more pressure on prices in the near future. This ongoing price weakness seems to be fundamentally driven, not just a temporary fall. Monetary policy-wise, this continual drop in our trade terms makes it tougher for the Reserve Bank of New Zealand to maintain its tough stance. We should consider the possibility that the RBNZ will postpone its next interest rate hike. This potential policy change adds more downward pressure on the New Zealand dollar.

    Historical Context And Strategic Positioning

    Looking back, we saw a similar situation in August 2023 when several GDT price drops caused the NZD/USD to fall over 5% in just one month. This period reminds us of how quickly sentiment can shift against the kiwi when dairy prices drop. If the next auction shows weakness, we should expect sustained selling pressure. Given this outlook, we are preparing for a further decline in the NZD. Buying put options on currency pairs like NZD/USD offers a clear, risk-defined way to benefit from the expected weakness in the coming weeks. We are also thinking about selling out-of-the-money call options to collect premium, as the potential upside for the kiwi seems limited for now. Create your live VT Markets account and start trading now.

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