Fallout from this week's baby formula contamination threat weighed heavily on the New Zealand dollar yesterday, with news of curtailed orders from China driving the currency lower still.
Reports on Bloomberg and Reuters of formula orders being reduced or put on hold helped push the kiwi down through key support at US72.50c in afternoon trading. By late in the day, the kiwi was at US72.27c - down by more than US1c since just before Tuesday's announcement by the Government that a threat to contaminate infant formula with 1080 poison had been made.
"We are seeing some suggestions that some orders are being placed on hold because of that threat, so the New Zealand dollar does remain under pressure because of that," said ANZ senior foreign exchange strategist Sam Tuck. "We don't think the long-term effect on the NZ dollar is going to be significant, but we do not think that there can be anything positive for the New Zealand economy to come of this, so the risks remain on the downside."
The primary influence over the kiwi, and its steadily weakening Australian counterpart, was a resurgent US dollar as expectations that US interest rate markets would soon return to normal started to take hold, but the 1080 scare remained a compelling reason to sell, dealers said.
