Markets

Reserve Bank cut underpins dollar-driven 20-60 cent wool price rally

Sheep Central, May 6, 2016

Wool sales Landmark1 MelbourneWOOL prices rose this week after a record 1.75 percent cut in the Reserve Bank’s cash rate triggered a further decline in the Australian-US dollar exchange rate.

With Merino fleece general trading 20-60 cents/kg clean higher than last week, the AWEX Eastern Market Indicator rose 28 cents to 1268c/kg clean, with brokers passing in 5 percent of the 35,914 bale offering.

AWEX senior market analyst Lionel Plunkett said the Australian dollar was trading above US77 cents early in the week, but closed for the week at US75.02 cents, 1.19 cents lower than the previous Thursday. The EMI in US dollar terms lifted 5 cents to US951 cents.

“Wool prices reacted with a continuance of the recent rally and another sharp jump over the two days of selling.

“The opening day recorded the best result with rises of 30 to 40 cents,” he said.

“Melbourne was more subdued with rises of 20 cents after a strong opening which had moderated over the course of the day.

“This pattern repeated on Thursday but the results were more mainstream with closing quotations that were 5 to 10 cents higher than the previous day,” Mr Plunkett said.

Stylish types maintained their momentum on this day, particularly in Melbourne where they added another 20 to 30 cents in the finer ranges, he said.

“The increases for these types capped off a successful week where selected types were 50 to 60 cents higher than the previous week.”

Mr Plunkett said Merino skirtings rose equally each day to close around 40 cents higher.

“Good length types with low vegetable matter continued to attracted most interest, especially those displaying little cott or colour.”

Mr Plunkett said crossbreds had a fairly quite week, firming 5 to 10 cents for the sale.

“Merino cardings made progressive increases to close the sale 10 to 20 cents dearer.”

Demand stable with EMI at US951 cents

The Australian Wool Innovation weekly market report said despite the turbulent local wool market over the past month, it has been remarkably stable over the last five weeks with the EMI around the US951 cent level.

The offering of around 36,000 bales next week should see competition remaining relatively strong, but some buyers may be looking for some respite following the strong rises of the past two weeks, the AWI report said.

“Market strength and direction will most likely be determined by the voracity of the Chinese indents which led this week’s market into higher $A price zones.”

Click here for latest AWEX Micron Price Guides.

Source: AWEX

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