The New Zealand dollar slumped on concern a food contamination scare at Fonterra Cooperative Group, the nation's largest dairy company, will hit exports.
The kiwi fell to a month low of 76.99 US cents, and recently traded at 77.15 US cents from 78.31 cents at the New York close and 78.87 cents at the 5pm market close in Wellington on Friday. The trade-weighted index dropped to 73.71 from 75.16 Friday.
The local currency slid after Fonterra, the world's largest dairy exporter, said on Saturday it had found bacteria which can cause botulism in some of its dairy products, prompting China and Russia to ban products. Dairy makes up about a quarter of New Zealand's export earnings.
"The kiwi has dropped a cent and a half in reaction so far because it has affected exports," said Imre Speizer, senior currency strategist at Westpac Banking Corp. " Countries have suspended exports and the kiwi has had a knee jerk reaction. Until we do some quantitative analysis on exactly what this means for the New Zealand economy, I can't say how much further the kiwi will go or not go."
The contamination scare comes five years after the scandal in China over Sanlu Group, which was 43 per cent owned by Fonterra and whose milk was found to be laced with melamine. Fonterra revealed in September last year that traces of a fertiliser additive known as DCD was found in some milk samples.
