NZD battles through its tarnished 'dirty pipe' dairy finding
10.50 NZST, Wednesday 7 August 2013
NZD battles through its tarnished
'dirty pipe' dairy findings
By Andrew May (Sales Trader, CMC Markets New Zealand)
New Zealand dollar crosses have experienced a tumultuous couple of trading days, suffering incredible angst in the aftermath of the ‘dirty pipe’ scandal in which tainted milk powder exports invoked botulism scares worldwide. A global wide recall of milk products ensued. China – our second largest trading partner, began to turn their noses up at the ‘clean green’ image of New Zealand’s dairy industry and global dairy magnate Fonterra. A strongly opinionated ‘fool me once shame on you, fool me twice shame on me..’ customer knee jerk reaction to now a running series of blunders which began with 2008’s Melamine milk powder tainting has once again tarnished New Zealand’s reputable dairy export industry. The enormity of the scandal knocked the NZDUSD down off its pedestal by as much as 120pts Monday morning to 0.7730. And considering the dairy industry contributes 2.8% of GDP and about 25% per cent of exports worth NZ$10.4 billion annually, it was all hands on deck to stem further global condemnation.
However over the last 24hrs the NZD has received some welcome news and shrugged off the initial wrath which coincided with reports China has not imposed a blanket ban on all NZ Dairy products. Astoundingly enough and with much surprise, the Kiwi has reclaimed all ground lost since Monday. The NZDUSD opens up 80pts today to 0.7910.
All ministerial eyes were on the overnight milk powder auction which saw prices fall marginally 2.4%. There was certainly no sign the general dairy market had been spooked. Prices overall remain extremely elevated and are still 71.5% higher than a year ago. It would seem to prove that the world dairy market remains tight. So as long as Fonterra doesn’t herald any more ‘clangers’, then the remaining test of due diligence will be the 2nd quarter jobs number out shortly. Consensus is for a slight increase to 6.3%. If the headline figure is thereabouts, there should be a further push to the upside opposing resistance at 0.7930.