Dollar dives, rebounds following 1080 threat

File photo / NZ Herald

The New Zealand dollar dipped then bounced back on a so called "relief rally" after the news of a infant formula contamination threat broke in volatile trading.

Police are appealing for the public's help following a threat to contaminate infant formula and other formula in an apparent protest over the use of 1080 poison in pest control.

The New Zealand dollar was weakening as talk of a big announcement about the dairy industry - by far the country's biggest export - spread through the financial markets.

In the minutes preceding the 3.45pm announcement, the Kiwi went from US73.40c to US72.80c but rebounded to US73.10c when the announcement came out.

By 4.20 pm it had eased back to US72.90c.

"The New Zealand dollar is obviously highly sensitive to anything to do with our primary industries, so you would expect it to weigh on the currency a little bit, but over the long term you would expect our trading partners to be comfortable with the response that's been put in place," said Sam Tuck, senior foreign exchange strategist at ANZ Bank.

Earlier, exchange operator NZX announced it had placed a trading halt on all dairy futures and options trade and said trading in the shares of three big dairy companies had been put on hold.

Normal futures trading will resume on Wednesday, the exchange said.

Dairy futures prices had been weakening since last week.

Trade in the units of Fonterra and in shares in Synlait Milk and A2 Milk have also been put on a trading halt, the exchange said.

The halt over Synlait shares and Fonterra units lifted by 4.30pm.