Foreign exchange movements benefit fine Merino and crossbred wool prices

Sheep Central September 16, 2016

Wool sales Landmark1 MelbourneFINE Merino and crossbred wool prices lifted around foreign exchange movements this week, but medium and strong Merino rates fell.

As the $A-US exchange rate fell US2.16 cents to 74.64 cents, the AWEX Eastern Market Indicator closed six cents higher on 1311c/kg clean.

The EMI in $US terms fell 24 cent to US979 cents – its lowest level for the season – and brokers passed in 5.3 percent of the 37,436-bale offering.

AWEX senior market analyst Lionel Plunkett said the sharp fall in the $A-US exchange rate was a key aspect this week.

“The cheaper dollar helped propel the finer microns to increases of 10 to 20 cents, which in turn boosted the Eastern Market Indicator by 6 cents for the series.

“As with recent sales 19-microns and finer was most affected, particularly in the lower spec types where there were increases of 20 to 30 cents,” he said.

“The broader microns initially held firm before succumbing to weaker demand on Thursday and falling 10 to 20 cents.”

Mr Plunkett said the Merino skirting market mirrored the fleece market with a stylish selection of FNF skirtings (less than 2pc vm) maintaining strong interest and making modest increases for the sale.

“Finer crossbred types (25/26 microns) continue to find favour on limited volumes, increasing another 10 to 20 cent this week.

“The broader crossbreds (30/31 microns) rebounded from last week’s abrupt falls with restrained rises of 5 cents.”

Mr Plunkett said Merino carding types preserved their recent trend, making only slight movements over the two days.

Lack of follow-up orders tempers upward trend

Australian Wool Innovation’s weekly market report said the Australian dollar’s fall against the $US greeted the start of the selling week, lifting prices substantially in $A values. However, lack of follow up orders quickly extinguished the push and prices began to ease across the selection.

“The lack of keener interest from Chinese indents spooked the market, especially given the advantageous rates in play for these overseas users.

“Basically the first day was dearer and the second day firm to easier,” AWI said.

AWI said the EMI’s fall to 979 cents in $US terms was a more attractive level for overseas users.

“In fact, the EMI when expressed in all of the major trading currencies fell similarly, relevantly in CNY and Euro by about 2.5 percent, which should help stimulate some buying activity.

“The dramatic change in the foreign exchange rate unfortunately did not deliver the expected change in wool prices in $A terms,” AWI said.

“That was exactly the sentiment following the results of this week from trade participants.

“Most thought the price rises would nearly match the depreciation of the dollar, but that was not the case.”

AWI said next week’s offering of 42,000 bales including a large volume of 19-23 micron wools in Melbourne is expected to place pressure on price, similar to what occurred on the final day this week.

Sources: AWEX, AWI.


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