The AWEX Regional Indicators finished 2.7% higher, on average, at sales in Sydney, Melbourne and Fremantle this week when the US exchange rate rose by 0.1%.
It was a much stronger market in a small sale this week. There were good rises across all Merino types and micron ranges on both days, with the best gains from 18.5 to 21.0 microns. Crossbred types also made gains, but not to the same extent as the Merino types. It was the biggest rise in the EMI since the first week of February, when it rose by 39¢.
The rise comes on top of news of business being done with China earlier in the week. But, given the recent volatility there is still considerable uncertainty about the market.
The offering was one of the smallest for the season. Offerings over the next three sales are also expected to be under 40,000 bales; and less than in the same weeks last year in two of the three sales. This ends a run of six months when this this year’s offerings were consistently above those in the same weeks last year.
The US exchange rate had a volatile this week following the Reserve Bank’s decision to lower the official cash rate by 0.25% to 2.75% on Tuesday, with hints of more cuts to come. 2.75% is the lowest level set by the RBA since its creation in 1960.
Financial analysts have speculated about whether the RBA is trying to achieve a lower value for the Australian Dollar and the chances of achieving this. Most seemed to think that the chances are slim, given that a number of Central Banks in much larger economies are trying to achieve the same result for their currency.
In South African sales, the Cape Wools Indicator was down by 3.5% since last sale, against a 1.5% appreciation of the Rand against the US Dollar and a 0.7% appreciation against the Euro. There is a “catch up” component to this, as South Africa did not sell last week when the market fell sharply.
Skirtings also had a good week, following the fleece type wools up on both days. Crossbred wools recorded gains, but not of the same magnitude as the Merino wools. It was also a good week for the oddments.
In New Zealand, Wool Services International quoted “fine” crossbred wool (35 microns) as 3 to 8% dearer, depending on length
Buyers for China were dominant, with support from buyers for India and from Europe, who made a return to the market this week.
Sales will be held in Sydney, Melbourne and Fremantle next week, when 37,603 bales are currently rostered for sale. Present estimates for the following two sales (Weeks 47 and 48) are 37,850 and 37,450 bales, respectively; an increase of 0.6% over the three sale period when compared with last year.
