The New Zealand dollar fell to a year low as it declined along with other commodity currencies on concern about slowing growth in China and cemented that low after Fonterra Cooperative Group cut its forecast payout to farmers.
The kiwi fell to 80.40 US cents after Fonterra's 8.30am announcement, its
lowest since September last year. The dairy exporter cut the 2015 forecast payout to $5.30 per kilogram of milk solids from a previous forecast of $6/kgMS. The local currency was trading at 80.67 cents immediately before the announcement in Wellington, down from 81.25 cents at 5pm yesterday. The trade-weighted index fell to 78.11 at 8am from 78.53 yesterday.
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• Fonterra cuts milk payout
Investors are reducing holdings of currencies including the kiwi, Aussie, Canada's loonie and Brazil's real, on concern slower growth in China, the world's second-largest economy, will reduce demand for commodities. New Zealand's currency underperformed overnight ahead of Fonterra's earnings announcement today which confirmed expectations it would pull back its forecast payout to farmers. Dairy products are New Zealand's biggest commodity export.
"Part of the reason that kiwi has outperformed on the downside is because of apprehension ahead of the Fonterra announcement this morning," said Bank of New Zealand currency strategist Raiko Shareef. "There is a lot more awareness about what a payout forecast actually means and most people are expecting somewhere in the region of $5.50 or less so the market is positioned for a bit more downside to be struck off that."
