Kiwi Slides Hard on Dairy Contamination Scare

The New Zealand Dollar lost almost 200 pips against its U.S. counterpart during the early Asian session after investors learned that the potentially fatal botulism bacteria was found in some products exported by the country’s largest dairy producer, Fonterra. Dairy farming is one of New Zealand’s largest and most important contributors to both GDP and tax revenues. The main concern is that many Pacific Rim countries, including China which is a major export destination, could ban Fonterra’s goods.

Analysts, however, don’t believe that the Kiwi’s value will get any worse than the initial knee-jerk reaction by market players so long as investors are not left in the dark and information is forthcoming. Already the NZD/USD pair has recovered from the session low of $0.7670 and was trading more recently at $0.7739 but had briefly touched on a high of $0.7773.

Also in Asia, the U.S. Dollar is struggling for traction following Friday’s release of private sector jobs data which fell short of analysts expectations. The numbers of new jobs in July rose by only 162,000 against the consensus call for 184,000; June’s figures were also revised downward to 188,000 from 195,000. The U.S. Dollar Index had dropped 0.5% on Friday and was trading flat at 81.934 .DXY during the Asian session.