Milk Powder Falls 50%, Kiwi Drops

New Zealand’s currency may drop to a more than two-year low, according to Morgan Stanley, as a 50 percent slide in milk powder fuels speculation the central bank will delay interest-rate increases.

The price of whole milk powder fell this month to a five-year low at auctions held by GlobalDairyTrade, which is owned by Auckland-based Fonterra Cooperative Group Ltd.

The kiwi tumbled 9.6 percent since June 30 to 79.21 U.S. cents as of 10 a.m. in Tokyo, the worst-performing major currency after the Brazilian real.

Morgan Stanley this month cut its year-end forecast for the kiwi to 76 U.S. cents, a level the currency hasn’t traded at since June 2012, from a previous projection of 80 cents. It expects the New Zealand dollar to decline to 67 cents at the end of next year, rather than to 73 cents as previously estimated.

Dairy prices have slumped this year as China, Fonterra’s biggest customer, bought less in fortnightly auctions after earlier building up milk-powder stocks. Fonterra cut its forecast milk pay-out to New Zealand farmers in September. It said on Sept. 24 it will pay its 10,500 farmer suppliers NZ$5.30 ($4.20) a kilogram of milk solids in the current season, down from a previous estimate of NZ$6.