An increase in the kiwi dollar made New Zealand’s exports less attractive which led to a decline in wool prices of the country.

Clean 35-micron wool prices, a benchmark for crossbred wool used for carpets and accounting for the majority of New Zealand's production, dipped to $5.74 a kg, down $0.21 a kg at yesterday's combined North and South Island wool auctions, as compared to $5.95 a kg last week.

Lamb wool slipped to $7.14 a kg, down $0.11 from $7.25 a kg last week.

During the last five days, the kiwi dollar has jumped 2.7% against the greenback, the transacting currency for many commodities. However, the price for 35-micron wool remains 18% ahead of the same time last year, while lamb wool is 17% higher. A stronger New Zealand dollar makes the country's exports more expensive for overseas buyers.

"Despite New Zealand's higher wool prices, international buyers have yet to turn to other markets or synthetics which indicate that demand for New Zealand product is strong enough to maintain higher prices," industry experts say.

However, currency is anyway an important thing to watch. Prices eased at this week's combined North and South Island auction on the back of a higher New Zealand dollar.

Just 78% of the combined 13,356 bales offered at auction were sold, down from 94% that cleared at auction last week, and marking the lowest level since October.

China is New Zealand's largest wool market and demand has reduced from this market due to upcoming Chinese New Year holiday period which starts this weekend.