New Zealand dollar falls as safety worries threaten dairy exports
Monday, 5 August 2013 23:44
Reuters: The New Zealand dollar fell to a one-year low against the U.S. dollar on Monday after New Zealand’s major dairy exporter, Fonterra, said it had found bacteria in some of its products that could cause botulism.
China halted the import of some dairy products from New Zealand and Australia in response, highlighting the threat to New Zealand’s $9 billion annual dairy trade.
The New Zealand dollar tumbled as low as $0.7670 in thin Asian trade, its weakest since June 2012. It regained some of the lost ground in European trade and was last down 0.3 percent at $0.7805.
Dairy produce accounts for about a quarter of New Zealand’s export earnings and any development that could hurt its exports typically causes the currency to fall.
The currency would be vulnerable if the U.S. dollar, which fell after Friday’s below-forecast U.S. jobs data, turns higher again. The next important chart support was at the June 1, 2012 low, $0.7456.
“There was an exuberance in the market relative to the significance of the milk scandal, but other factors may drive the New Zealand dollar lower in the medium term,” said Hans Redeker, head of global foreign exchange strategy at Morgan Stanley.
“New Zealand has substantial foreign liabilities so that country is particularly vulnerable if risk appetite turns.”