Reuters: US Dollar Report: FOREX-NZ dollar hit hard by food scare, majors calmer

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FOREX-NZ dollar hit hard by food scare, majors calmer Aug 4th 2013, 23:09 Sun Aug 4, 2013 7:09pm EDT * Kiwi suffers steep fall in early trade * NZ's Fonterra reports botulism bacteria in some of its products * USD nurses losses after jobs data disappointed some * Aussie eyes retail sales data, China services PMI By Ian Chua SYDNEY, Aug 5 (Reuters) - The New Zealand dollar skidded nearly 2 U.S. cents to one-year lows on Monday morning as investors feared the worst after major dairy exporter, Fonterra, found botulism bacteria in some of its products. The news sparked worries that countries such as China would ban products from Fonterra, the world's largest dairy exporter. There has been no official response from Beijing as yet. Other major currencies were calmer following an uneventful weekend, with the U.S. dollar nursing losses against the euro and yen after a closely watched report on Friday showed U.S. employers slowed their pace of hiring in July. The kiwi was marked as low as $0.7670, versus around $0.7840 late in New York on Friday, reaching lows not seen since June 2012. Solid support is seen around $0.7500, lows seen in May/June 2012. It has since recovered to NZ$0.7765. "It's a pretty serious development for New Zealand given how important dairy is. But what usually happens with these food quality issues is that as details come out, people tend to feel more reassured," said Chris Tennent-Brown, FX economist at Commonwealth Bank in Sydney. "That is what's happening this morning. The kiwi has already recovered over half of the dip and unless developments take a turn for the worse, the kiwi shouldn't plunge further." The kiwi was also sold against other currencies. The euro surged to NZ$1.7226, its highest since December 2011. The Australian dollar climbed as far as NZ$1.1547, pulling well away from a five-year low of NZ$1.1196 plumbed last week. The euro was last at NZ$1.7117, while the Aussie traded at NZ$1.1486. NOT IMPRESSED The U.S. dollar remained on the backfoot against its major peers after the payrolls report was seen making the U.S. Federal Reserve more cautious about drawing down its huge economic stimulus programme. The number of jobs outside the farming sector increased by 162,000 last month, the smallest gain in four months and below analysts' expectations, yet the unemployment rate fell to 7.4 percent from 7.6 percent. "Overall, the report failed to impress," analysts at Nomura said in a note. Still, they believe the results are strong enough to keep the Fed on track to begin reducing the pace of its asset purchases in September. The dollar index opened little changed at 81.934, having fallen 0.5 percent on Friday. The euro bought $1.3281 , holding on to most of Friday's gains. Against the yen, the dollar fetched 98.90, down from a high around 99.95 seen late last week. The Australian dollar was spared most of the drama faced by its kiwi neighbour. It traded at $0.8915, just off a 3-year trough of $0.8870 hit on Friday. The near-term focus for the Aussie is retail sales data due at 0130 GMT. Forecasts centred on a rise of 0.4 percent for June. Any disappointment will only reinforce expectations that the Reserve Bank of Australia will cut interest rates to record lows on Tuesday. HSBC's report on China's services sector due at 0145 GMT will also be closely watched. Signs of a slowdown in the world's second biggest economy has already weighed heavily on the Aussie. There was no reaction to news that a general election has been called on September 7. Markets usually pay scant attention to Australian politics, given both major parties tend to be very middle-of-the-lane when it comes to managing the economy. Link this Share this Digg this Email Reprints

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