'Double whammy' knocks kiwi back

THE New Zealand dollar has extended its decline after government figures showed the biggest monthly trade deficit in almost five years, and after rotten apple exports into China became the food export woe to the country's biggest trading partner.

The kiwi fell to US82.27 cents at 5pm on Wednesday in Wellington from US82.70c at 8am and US83.35c on Tuesday.

The trade-weighted index declined to 76.75 from 77.63.

New Zealand reported a trade deficit of $1.19 billion in August as falling export milk volumes and a one-off purchase of an offshore drilling rig tipped the balance in favour of exports, according to government figures on Wednesday.

The quarantine of three consignments of apples by Chinese officials after they were found to be rotten added to the downbeat view of New Zealand exports, just a month after the false food alarm over dairy products.

"The kiwi was hit by a double whammy," said Tim Kelleher, head of institutional FX Sales NZ at ASB Institutional in Auckland.

"We had the worst trade deficit on the back of a big drop in milk volumes" and then "we had New Zealand halting some apple exports to China," he said.

Mr Kelleher said he expects the local currency will find support at US81.50/82c, with selling at US82.75/83c.

Fonterra reported 2013 annual earnings of $1b, affirming it missed prospectus forecasts by 7.3 per cent, and the dairy exporter has warned the first half of 2014 would be tight, while hiking its forecast payout to farmers.

The NZ dollar on Wednesday dropped to 87.74 Australian cents at 5pm, from 88.51 cents on Tuesday, and sank to 81.19 yen from 82.37 yen.

It fell to 61.10 euro cents from 61.76 cents and declined to 51.46 British pence from 52 pence.

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