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THE TAKEAWAY:Fonterra Cooperative Group finds bacteria contamination > China and Russia issue import bans > New Zealand’s dairy industry at stake > NZD/USD Lower
The New Zealand Dollar fell 1.76 percent against the US Dollar at the open on dairy product contamination concerns. Over the weekend, New Zealand’s largest dairy exporter, Fonterra Cooperative Group, announced it had found bacteria in some of its whey protein. As a result, China and Russia quickly issued import bans against products sourced from the dairy giant.
Dairy products make up a quarter of New Zealand’s exports with China as the largest customer. A scare could cut deeply into revenue streams that weigh against the country's economic future. This could lead investors to speculate on the possibility of stimulus from the Reserve Bank of New Zealand to encourage economic growth. A rate cut from the central bank could lower the appeal of the Aussie to yield-seeking investors and move NZD/USD lower.
NZD/USD (5-Minute Chart)
Source: FXCM Marketscope
The Kiwi fell 139 pips from 0.7838 to 0.7699 against the Greenback. But at the time of this writing, the pair has retraced to trim losses to 79 pips.
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Jimmy Yang, DailyFX Research Team
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