The New Zealand dollar has begun to decline after rising to an all-time high a few weeks ago, increasing 5 percent between September of last year and the middle of July. However, with rate increases put on hold and global milk prices struggling, the kiwi's strong period appears to have come to an end, reports The Financial Times.
The kiwi weakened by 0.45 percent at $0.8508 on Wednesday. This is its weakest since leading dairy company Fonterra slashed its forecast payout to farmers in the new season by 14 percent on June 10, according to Reuters.
One of the main reasons for the kiwi's strength was due to the country's success selling gallons of milk and tons of butter to satisfy Asia's increasingly demand for protein.
Raiko Shareef, a currency strategist at Bank of New Zealand said, "New Zealand has been in this period of economic expansion that's been propped up by a very strong dairy export story. The Kiwi has looked very appealing for international investors," as quoted by The Financial Times.
New Zealand is the only developed world economy where interest rates have already risen, supporting solid gains for its dollar this year. The central bank is determining the effect of higher interest rates on growth and inflation. In the meantime, rates are expected to remain on hold until the end of 2014, reports Reuters.
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