The kiwi dollar fell yesterday after Beijing lifted the duty on imported New Zealand milk.

China raised duties on whole-milk powder imports from New Zealand this month in line with provisions of the free trade agreement between the two nations. The tariff increased to 10 per cent, from 5.8 per cent, China National Radio reported, citing Jiangxi provincial commerce commission.

The first 115,473 metric tonnes of New Zealand milk powder imported by China in 2012 were subject to the lower tariff, instead of the 10 per cent, Agrifax said in a report in January.

Product exported from New Zealand in December was eligible for the lower rate, according to the report.


A spokesman for Fonterra said the tariffs were part of the free trade agreement and were not new.

"It's business as usual," he said.

The kiwi was already weaker as fourth-quarter economic growth missed estimates. The kiwi fell as low as US80.66c and traded at US80.81c at 5pm from US81.89c on Wednesday. The trade-weighted index sank to 72.18 from 73.

The tariff news added to the kiwi's woes after HSBC's flash PMI for China showed manufacturing in the world's second-biggest economy may be in for a fifth monthly contraction.

The transtasman currencies dropped sharply after the PMI, which came just two days after BHP Billiton warned of flatter Chinese demand for iron ore.

"There are headlines that China has raised duty on New Zealand milk imports, which is negative for the kiwi," said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional. "The PMI started the ball rolling, but the kiwi went down another 30 pips."

Kelleher said the kiwi was "edging towards" a turnaround with a weaker outlook for China weighing on the economic fortunes for Australia and New Zealand.

The level of US80.50c would be a key test, he said.


The kiwi fell earlier in the day after government figures showed gross domestic product grew 0.3 per cent in the three months ended December 31, half the 0.6 per cent pace predicted by the Reserve Bank and market economists.

New Zealand's currency fell to A77.76c from A77.99c on Wednesday, and dropped to 67.22 from 68.53.

It fell to €61.07c from €61.70c on Wednesday, and declined to 50.92p from 51.85p.

- Staff reporter, agencies