The Australian Eastern Market Indicator (EMI) jumped 30 Australian cents this week, pushing above 1000c a kilogram for the first time in four weeks. Buyers chased the reduced offering with the EMI pushed higher each day with 15c rises which resulted in the EMI closing at 1022c/kg on Thursday. However, in U.S. dollar terms, the indicator actually declined by 0.5 percent, to 1,010 U.S. cents per kilo.
It was the first time in eight months less than 35,000 bales have been offered - the third smallest auction for the season, according to Australian Wool Exchange (AWEX) data.
Concern over projections of a larger-than-expected deficit in the local economy and of the potential implications for trade with China of slower growth in that economy, along with strength in the U.S. dollar all contributed towards the Australian dollar moving below parity with the "greenback" for the first time for almost a year. The exchange rate on May 16 stood at well below A$1.00 = 99 US cents.
The upturn in the clearance rate was influenced by an improved offtake from Chinese buyers, albeit compared with the very sluggish trading conditions prevailing previously. The weaker exchange rate has undoubtedly been a factor encouraging fresh buying interest. Export offering rates declined modestly from a week earlier.
Levels of export demand should not be overstated, with the general textile market outlook in China still viewed with caution, if not a degree of pessimism. Wide exchange rate fluctuations appear to have been a major stimulus for business this week. The recovery in auction values may therefore only have short-lived momentum.
Reprinted in part from WTiN Market Report