Currency surge stalls market momentum

In the North, the indicator fell 29¢ to settle at 1,707 ¢/kg as fine wools faced the most pressure. The 17 MPG decreased 65¢ to close at 2,237 ¢/kg, while the 18.0 MPG dropped 56¢ to finish at 2,146 ¢/kg. Broad Merino types in Sydney also trended lower with the 19.0 MPG shedding 50¢ to settle at 2,048 ¢/kg. And the cardings provided a highlight by gaining 23¢ to end the week at 882 ¢/kg clean.

The Melbourne market mirrored the national trend as the Southern indicator slipped 20¢ to finish at 1,637 ¢/kg clean. In the fine wool sector, the 17.0 MPG finished 40¢ lower at 2,228 ¢/kg while the 18.0 MPG lost 51¢ to settle at 2,143 ¢/kg. Medium Merinos saw more measured losses with the 19.0 MPG falling 29¢ to 2,055 ¢/kg and the 21.0 MPG dropping 19¢ to close at 1,979 ¢/kg. The crossbred sector also faced headwinds as the 28.0 MPG finished 10¢ lower at 718 ¢/kg.

Western markets in Fremantle contributed to the softer tone with the indicator declining 19¢ to 1,859 ¢/kg clean. The 17.0 MPG in the West finished at 2,212 ¢/kg after a 40¢ retraction, and the 18.0 MPG settled 45¢ lower at 2,131 ¢/kg. The 21.0 MPG followed suit with a 37¢ loss to reach 1,998 ¢/kg, though carding types showed slight gains of 10¢ to finish at 919 ¢/kg.

The Australian dollar experienced a sharp surge this week, climbing above 70¢ for the first time in nearly three years on the back of hotter-than-expected inflation data. Reuters reported that core inflation topped forecasts, increasing the annual trimmed mean pace to 3.4% and significantly fuelling wagers for a near-term interest rate hike. This rapid appreciation represented a roughly 4% increase in the exchange rate compared to the close of previous wool sales, creating immediate headwinds for local prices as the market opened. The influential nature of the currency was such that, while local prices softened, the market recorded a healthy rise when viewed in US dollar terms; the EMI gained 40¢ for the week to close at 1,177 ¢/kg in USD terms.

This week in Mecardo, Andrew Woods examined the characteristics of the New Zealand merino clip, which remains a small but valuable component of global production despite being estimated at only 5–6% of New Zealand’s total wool exports (see article here). He found that while the clip has followed the general global pattern of becoming finer, it has recently developed a distinct broad micron tail. Specifically, he noted that 22.5 micron and broader wool has increased from 1.5% to 11% of the distribution over the past decade. He concluded that this shift effectively bridges the gap with the fine crossbred clip, making the 23–25 micron range a significant crossover point in New Zealand production.