Australian wool auctions operated under enormous foreign exchange pressures and growing caution this week. The week to week movement of the AUD against both the US dollar (+6.3%) and the Chinese Yuan (+6%) was extreme and exporters were displaying increasingly circumspect buying strategies to adjust to the rapidly changing trading environment. Prices were subsequently affected in AUD, with the leading all Eastern wool indicator 2.4% lower for the week. The Western indicator was more adversely by peeling back 3.6%.

Escalating tariffs between the USA and China had brought about concerns of the potential of a global economic slowdown, but by the USA exempting some key technology products out of China from the new tariffs, the value of the Australian dollar (AUD) was boosted heavily. Similar to last week when the local market values did not achieve the full extent of the potential gains, this week’s AUD auction prices held on much better than the theoretical falls that may have been possible in a straight forex conversion. 

The price realization results of the past two turbulent weeks of trade have been directionally easy to pick for participants, but the magnitude on both the plus and minus side has been rather awkward but remarkably calm. Whilst fresh demand has reduced enquiry and conversion to new business, there has been enough prompt manufacturing buying and forward contracts on the traders books needing completion to keep some semblance of normality in play.

Merino types were generally 35 to 50ac cheaper for the week, with the majority of those falls occurring on the first day from the first lot. Once that pull back number was set, the remainder of the day traded largely at the same rates. The final day saw a much better auction environment, with a large portion of the better wools trading firm and only the lower spec wools dropping 5 to 15ac for the day.

The week off for auction sales next week is widely believed to be opportune to allow clearer macro economic signals to mitigate risk for all.