Kiwi skids to two-month low
The New Zealand dollar dipped below US85c overnight, its lowest level in nearly two months, after a big cut in Fonterra's payout forecast.
Yesterday Fonterra announced a revised farmgate milk price forecast of $6 per kg of milk solids, $1 below its initial forecast of $7/kg.
The kiwi dropped by half a cent against the greenback after the announcement shortly before 5pm yesterday, hitting a seven-week low of US84.9c at about 7.30am.
It fell against most major currencies in a broad sell-off before stabilising this morning.
The New Zealand dollar dropped by 0.4 euro cents to a low of 63.27 euro cents and A0.6c to A90.43c.
The kiwi has now fallen more than US3c against the US in the last three weeks, after coming close to the post-float high of US88.42c earlier this month.
Westpac senior market strategist Imre Speizer said yesterday's Fonterra announcement was not "new" information as dairy price falls had already been seen in the GlobalDairyTrade auctions.
He said the strong run by the New Zealand dollar this year had probably come to an end.
"We think the kiwi will continue to decline against the US for much of this year and also decline against many other currencies particularly the Aussie," he said.
"The complexion of the economic data has not turned negative but the positive momentum has waned. Commodity prices are one of the most obvious negative developments in the last few months."
Speizer said the next "target" was US84c, which could be reached within the next few days as a raft of economic announcements are due from the United States.
"In the US, markets are now thinking of the prospect of the Federal Reserve hiking up interest rates either early or mid next year."