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.
• 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.
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"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."
Traders will also be eyeing August trade balance data to be published today and should both news events underperform, kiwi is likely to decline further, BNZ's Shareef said.
"The bias is still certainly for weaker," he said.
The Reserve Bank will release data this afternoon on the level of low equity mortgage loans for August.
The New Zealand dollar was little changed at 91.14 Australian cents from 91.16 cents yesterday. It fell to 62.72 euro cents from 63.21 cents, and dropped to 49.18 British pence from 49.59 pence. The kiwi declined to 87.81 yen from 88.35 yen yesterday.