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FOREX-Kiwi hit by food scare; Aussie slips on flat retail sales
August 5, 2013 / 6:04 AM / 4 years ago

FOREX-Kiwi hit by food scare; Aussie slips on flat retail sales

* Kiwi dollar touches lowest level in more than a year

* Fonterra reports botulism bacteria in some of its products

* China suspends import of some Fonterra products

* Aussie dlr hits 3-year low on lacklustre retail sales

* USD nurses losses after jobs data disappoints some

By Masayuki Kitano and Ian Chua

SINGAPORE/SYDNEY, Aug 5 (Reuters) - The New Zealand dollar skidded to a one-year low on Monday after New Zealand’s major dairy exporter, Fonterra, said at the weekend it had found bacteria in some of its products that could cause botulism.

Dairy produce accounts for about a quarter of New Zealand’s NZ$46 billion ($36 billion) annual export earnings, and the currency is sensitive to the fortunes of Fonterra, the world’s biggest dairy exporter.

Fonterra said over the weekend that contaminated whey protein concentrate had been exported to China, Malaysia, Vietnam, Thailand and Saudi Arabia and used in products including infant milk powder and sports drinks.

In response, China has halted the import of some dairy products from New Zealand and Australia, New Zealand’s Ministry of Primary Industries said.

The kiwi was marked as low as $0.7670, versus around $0.7840 late in New York on Friday, reaching lows not seen since June 2012. The kiwi later recovered to $0.7782.

“It’s a pretty serious development for New Zealand given how important dairy is. But what usually happens with these food quality issues is that as details come out, people tend to feel more reassured,” said Chris Tennent-Brown, FX economist at Commonwealth Bank in Sydney.

Elsewhere, the Australian dollar hit a three-year low after weaker-than-expected retail sales data reinforced expectations of further interest rate cuts by Australia’s central bank.

The Aussie dollar touched a low of $0.8848, its lowest level since August 2010. The Aussie later came off that low, however, and last stood at $0.8891, down 0.2 percent from late U.S. trade on Friday.

The Reserve Bank of Australia is widely expected to cut interest rates to a record low of 2.5 percent on Tuesday, following dovish comments last week from RBA Governor Glenn Stevens. Some market players suspect that the central bank could ease policy further later this year.

Other major currencies were calmer, with the U.S. dollar struggling to gain traction after a closely watched report on Friday showed U.S. employers slowed their pace of hiring in July.

U.S. PAYROLLS REPORT

The U.S. payrolls report was seen making the U.S. Federal Reserve more cautious about drawing down its huge economic stimulus programme, and cast some doubt on whether the Fed would start reducing its bond purchases in September.

A Reuters poll on Friday found that fewer U.S. primary dealers expect the Fed to begin reducing economic stimulus in September than they did a month ago, with dealers now split over whether the central bank will cut back on buying in September or in the following few months.

“We’ve seen a correction in the U.S. dollar back to the downside. In the very short term, given positioning, it may extend further,” said Callum Henderson, global head of FX research for Standard Chartered Bank in Singapore.

The dollar fell 0.3 percent to 98.67 yen. The euro held steady at $1.3281, clinging to its gains from Friday, when it rose 0.5 percent versus the dollar.

Currency speculators still have a net long position in the dollar, although they pared back such bets in the latest week, according to data from the U.S. Commodity Futures Trading Commission.

The value of the dollar’s net long position fell to $24.45 billion in the week ended July 30 from $28.69 billion the previous week.

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