Lactose shock pushes Kiwi down

Last week New Zealand Dollar took a breather after 11 weeks of record consecutive decline, it seems this week Kiwi bulls are back at it again.

This week New Zealand dollar is down almost 230 pips from its high already and the aggressive move suggests that further down side is likely.

Why it's getting hammered?

• The answer is simple - Milk.
  
• New Zealand's Fonterra Cooperative, world's largest dairy exporter saw milk prices drop by 10.7% in its regular auction. Last week there was drop of 5.9%. Moreover, volume of Milk sold, also dropped by 4.5% indicating further rout in prices.

Dairy farmers form large chunk of New Zealand's economy, naturally Kiwi is extra sensitive to milk price. Dairy farmers contribute about 7% of country's GDP, while it provides almost one third of world's milk.

• Milk prices have dropped close to 65% since 2014. Naturally Kiwi is so down beat against dollar.

Recently, Reserve Bank of New Zealand reversed its hawkish stance and turned dovish and is expected to take further measures to prevent ailing economy.

Next RBNZ meeting is scheduled on 23^rd July. Kiwi is currently trading at 0.651 against dollar.