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Despite low volumes, Australian wool market continues to strengthen

At a time when low volumes have forced buyers to increase activity to feed early stage processing machinery, the Australian wool market held its ground and continued to strengthen last week. Wool prices moved upward despite stronger local currency with the Australian dollar increasing from its low of US75.85c early last week to a high of US77.25c . Consequently the EMI rose by 13c in local terms, but a significantly higher 29c in US dollar.

All superfine wool types rose steadily but the strongest rise were seen in the medium Merino types as buyers sought quantity to keep their mill machinery turning. The medium Merino categories increased by as much as 30c, as did the skirting types and cardings being used mainly for knitwear production. Crossbred wools failed to generate the same interest and closed the week more or less unchanged.

Currency movements often play a large part in wool market direction over the short term, with many buying limits being provided to an exporter in US dollars and only converted as lots are purchased or at the end of a sale day. For much of last year, the wool market was supported by a lower exchange rate – at least in terms of prices received by Australian woolgrowers – and to date this year has not provided the same benefit. Since July the currency has been trading in a range of more or less 75c-77c and firmer commodity prices have prevented the Australian dollar from falling further despite the strengthening value of the US dollar.

 
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