NZ dollar slides as Fonterra food scare puts exports at risk
Aug 5 (BusinessDesk) - The New Zealand dollar fell to a one month low as concerns over contamination in Fonterra Cooperative Group dairy product sparked fears over the country’s biggest export commodity.
The kiwi fell as low as 76.99 US cents, trading at 77.71 cents at 5pm in Wellington from 77.15 cents at 8am and 78.87 cents on Friday in New York. The trade-weighted index dropped to 73.81 at 5pm from 75.16 on Friday last week.
Investors sold the kiwi after Fonterra, the country’s biggest company, said it had found bacteria which can cause botulism in a batch of whey protein concentrate. Dairy makes up about a quarter of New Zealand’s export earnings. Prime Minister John Key told reporters at his weekly post-Cabinet press conference he expects a short-term hit to the economy, though he was more confident about the medium and longer term prospects.
“It’s very difficult to tell the scale and scope of the problem,” said Michael Johnston, senior dealer at HiFX in Auckland. “Quite a few exporters are buying (kiwi) at these levels, seeing it as an opportunity.”
A BusinessDesk survey of 10 traders and strategists predict the local currency may trade between 75.50 US cents and 80.60 cents this week. Five expect the currency to fall this week, two expect a gain while three say it will remain neutral. Still, one of those expecting a gain said he was unsure about the effect of Fonterra.
The kiwi fell to 87.53 Australian cents from 88.58 cents last week after flat retail sales figures across the Tasman missed expectations, and ahead of tomorrow’s Reserve Bank of Australia meeting, where the central bank is expected to cut the key rate a quarter-point to 2.5 percent.
The local currency dropped to 76.76 yen at 5pm in Wellington from 78.50 yen last week and declined to 58.54 euro cents from 59.70 cents. It fell to 50.88 British pence from 52.16 pence last week.