NZ dollar holds gains as Fonterra food scare contained, improving labour market

By Paul McBeth

Aug 7 (BusinessDesk) - The New Zealand dollar held its gains in the local trading session as the furore over Fonterra Cooperative Group’s tainted whey protein appears to be contained, and as local jobs figures show continuing improvement in the labour market.

The kiwi traded at 78.94 US cents at 5pm in Wellington from 78.98 cents at 8am, up from 78.51 cents yesterday. The trade-weighted index advanced to 74.66 from 74.37 yesterday.

Fonterra chief executive Theo Spierings told a media briefing today the dairy exporter has launched an investigation into its tainted product, returning to New Zealand from the company’s key Chinese market after he was satisfied the food scare had stabilised. Traders have recovered confidence in New Zealand’s dairy exports after an initial scare on the news, and a record volume of product was sold at today’s GlobalDairyTrade auction.

“We’ve had a lucky escape with the milk scare with high demand at the auction and volume jumping,” said Stuart Ive, senior client adviser at OM Financial in Wellington. “At the moment it looks like a fairly contained situation, and the kiwi/US is maintaining its elevated levels.”

Government figures showed New Zealand’s unemployment crept up to 6.4 percent in the June quarter from 6.2 percent in March as more people joined the labour market, and the participation rate rose.

OM’s Ive said the kiwi dollar is trading between 77 US cents and 77.70 cents, and will probably stay in that range until September, when investors predict the Federal Reserve will start slowing its money printing programme.

The kiwi rose to 88.04 Australian cents from 87.47 cents yesterday after government figures showed home loans approvals increased for a sixth month across the Tasman. The Reserve Bank of Australia cut the target cash rate a quarter-point to 2.5 percent yesterday, while holding back on saying if there’s scope for another cut.

The local currency fell to 76.80 yen from 77.11 yen yesterday ahead of tomorrow’s Bank of Japan meeting.

The kiwi rose to 59.34 euro cents from 59.18 cents yesterday and advanced to 51.50 British pence from 51.13 pence.

(BusinessDesk)

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