The New Zealand dollar dropped below US85 cents for the first time in seven weeks after Fonterra Cooperative Group cut its forecast payout to dairy farmers and a stronger US currency saw the kiwi lose some of its allure.
The kiwi was trading at US84.96c at 8am this morning in Wellington, from US85.15c at 5pm yesterday. It fell as low as US84.90c overnight.
The trade-weighted index fell to 79.40 from 79.52.
The New Zealand dollar underperformed other major currencies amid broad US dollar strength, with the greenback holding close to this year’s high against a basket of currencies.
Optimism is building about a recovery in the world’s largest economy ahead of major data and policy announcements this week starting with a Federal Reserve meeting and second-quarter GDP data and private payrolls report.
The kiwi fell half a cent in the lead-up to Fonterra’s announcement on yesterday it would cut the 2015 forecast payout to $6 per kilogram of milk solids from a previous forecast of $7/kgMS and from a record $8.40 /kgMS in 2014.
«It was a night of broader based US dollar strength,» said Bank of New Zealand currency strategist Raiko Shareef.
«The New Zealand dollar was the major underperformer and that can broadly be attributed to the Fonterra news.»
The local currency has declined 3.1 percent so far this month amid weaker-than-expected inflation and commodity prices and following Reserve Bank hints it may intervene to pull down the kiwi after signalling a pause in its hiking cycle.
This morning, the kiwi slipped to 90.52 Australian cents from A90.62c yesterday, weakened to 63.36 euro cents from 63.40 cents, was little changed at 50.15 British pence from 50.17 pence and declined to 86.75 yen from 86.84 yen.
Source: 3News