NZ dollar holds near 7-month low as Fonterra results awaited

Tuesday 23rd September 2014

The New Zealand dollar, which has dropped along with other so-called commodity currencies on concern China's economic growth is slowing, held near its lowest levels in seven months before Fonterra Cooperative Group's annual results, which may include a cut to its payout forecast.

The kiwi traded at 81.25 US cents at 5pm in Wellington, from 81.28 cents at the start of the day and from 81.56 cents late yesterday. The trade-weighted index declined to 78.55 from 78.79 yesterday.

Currencies of commodity producers including Canada and Australia have fallen along with commodity prices following comments from Chinese Finance Minister Lou Jiwei that Beijing won’t make major policy changes in response to individual economic indicators, damping prospects for a stimulus boost. The kiwi kicked up briefly after a measure of Chinese manufacturing was revised higher.

Fonterra releases its full-year results tomorrow, having warned this month that earnings before interest and tax would be at the lower end of its $500 million to $600 million guidance. Traders, though, are waiting for word on the dairy exporter's forecast farmgate milk payout, amid speculation it could be slashed to as low as $5.30 per kilogram of milk solids from $6/kgMS currently. Dairy products are New Zealand's biggest export.

"It's highly likely they downgrade the price and I don't think that is fully priced into the kiwi," said Imre Speizer, senior market strategist at Westpac Banking Corp. Currency markets are "very much still a China story and the kiwi is still on the back foot. The 81 (US cents) level is vulnerable."

The Bloomberg Commodity Index, a gauge of raw materials, fell as low as 118.20, the lowest level since July 2009, and was recently at 118.63, as traders speculated that demand in China, the world's fastest-growing major economy, will weaken. Still, the flash HSBC/Markit manufacturing Purchasing Managers' Index beat estimates with a reading of 50.5 this month from 50.2 in August.

The New Zealand dollar was little changed at 91.17 Australian cents from 91.24 cents yesterday. It fell to 63.22 euro cents from 63.41 cents, and dropped to 49.58 British pence from 49.87 pence. The kiwi declined to 88.35 yen from 88.73 yen yesterday.

BusinessDesk.co.nz

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