The Opening Bell: Where currencies start for Tuesday, July 31, 2012

By Dan Bell

The NZD/USD opens around 0.8080 after a quiet night across global markets.

The S&P 500 US stock index is unchanged from yesterday.  Commodities are mixed with the CRB Index up 0.97% but oil prices down 0.7%.

The World Bank on Monday said it stood ready to help governments respond to a broad-based run-up in food prices. 

Wheat prices have jumped more than 50% and corn prices more than 45% since mid-June, with a severe drought in the US Mid West, and dry conditions in Russia, Ukraine and Kazakhstan, excessively wet weather in Europe and a below average start to the Indian monsoon season adding to global crop worries.

Prices for soybeans, a critical food and animal feed crop have also risen almost 30% over the past two months and nearly 60% since the end of last year.

It will be interesting to see what impact this is having on dairy prices at the next few Fonterra Dairy Trade auctions.

The NZD made a new all time high against the EUR over 0.66 at one point overnight. Against the other major cross rates we open at 0.77 AUD, 0.5145 GBP, 63.10 JPY.

The markets appear to be in holding pattern leading up to the ECB and Fed announcements this week.

With the recent surge in risk appetite it wouldn’t surprise us to see a bit of profit taking as we get closer to these announcements.

From NZ today we get NBNZ Business Confidence at 1:30pm. From Australia we get Building Approvals and Private Sector Credit.

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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here