Strong currency weighs down exporters

New Zealand shares fell for a second day as the strong kiwi dollar took the shine off star exporters A2 Milk and Fisher & Paykel Healthcare.

Tuesday, September 1st 2020, 5:59PM

by BusinessDesk

The S&P/NZX 50 Index dropped 144.40 points, or 1.2 percent, to 11,793.16. Within the index, 28 stocks fell, 12 rose and 10 were unchanged. Turnover was $190.8 million.

The index has retreated quickly from its foray into record territory, dropping 2.7 percent since hitting an all-time high on Friday.

An uncomfortably strong currency is putting pressure on listed exporters - F&P Healthcare fell 3.6 percent to $35.51 and A2 Milk dropped 1.6 percent to $18.30.

Both stocks, which together comprise more than a quarter of the index, are sensitive to the exchange rate.

Reserve Bank governor Adrian Orr may try to talk down the high-flying kiwi dollar in a speech tomorrow, but he will be pushing against a global tide.

“The kiwi dollar is definitely having an impact on some of our major export related companies,” said Chris Smith, general manager at CMC Markets.

“We know Adrian Orr wants a lower currency. If it holds, we might start to see some action to weaken the currency and support the economy.”

The kiwi dollar climbed to 67.65 US cents today, the highest it has been all year, driven largely by the US Federal Reserve’s rollout of a new policy framework that's widely expected to see US interest rates stay lower for longer.

“With little appetite for the world’s base currency we expect ongoing US dollar weakness will underpin the kiwi upturn and open the door for an extension toward 0.68 to 0.70 into the end of the year,” an OFX analyst said in a note.

The kiwi dollar was trading at 67.57 US cents at 5pm in Wellington, up from 67.22 cents yesterday.

The trade-weighted index was at 72.17 at 5pm, up from 72.07 yesterday. The kiwi traded at 91.30 Australian cents from 91.44 cents, 71.46 yen from 71.02 yen, 56.35 euro cents from 56.48 cents, 50.38 British pence from 50.39 pence, and 4.6087 Chinese yuan from 4.6045 yuan.

The Reserve Bank of Australia held its official interest rate at 0.25 percent in its regular monthly meeting today. The decision was widely expected but dual-listed banks were weaker ahead of the decision, CMC's Smith said. The S&P/ASX 200 is down more than 2 percent today, further weighing on the NZX 50 Index.

Australia and New Zealand Banking Group declined 3.5 percent to $19.45 and Westpac Banking fell 3.1 percent to $18.70.

SkyCity Entertainment led the market lower, dropping 4.3 percent to $2.44, closely followed by Fletcher Building which fell 4.2 percent to $3.44.

Tourism Holdings posted the day’s biggest gain, rising 4.4 percent to $2.16.

Sky Network Television rose 1.5 percent to 13.9 cents. Today, a NZ On Air-commissioned survey showed just 36 percent of respondents used the pay TV operator’s online platforms in 2020, compared to 58 percent in 2014.

Fast-food operator Restaurant Brands yesterday announced it had finalised an agreement to buy 70 Taco Bell and KFC stores in the United States for $73 million, but its share price fell 1.4 percent to $12.03.

Trading has not been interrupted this week, although the NZX's website went offline intermittently which suggests the exchange may still be the target of cyber attackers.

Tags: Market Close