Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


NZ Dollar Outlook: Kiwi may fall as central banks mull rates

NZ Dollar Outlook: Kiwi may fall in week of central bank event risk

By Jonathan Underhill

Dec. 3 (BusinessDesk) – The New Zealand dollar may fall this week, while staying in its recent trading range, as traders await a plethora of central bank meetings against a background of stalled US fiscal cliff talks.

The kiwi dollar recently traded at 81.99 US cents, close to the centre of its trading range since mid-September, while it has gradually appreciated on a trade-weighted basis, with the TWI recently at 73.37.

It will remain in a range of about 81 US cents to 83.10 cents this week, according to a BusinessDesk survey of seven strategists and traders. Three of those polled see it ending the week lower, two higher and two see it range-bound.

Five central banks are scheduled to meet this week, with the most important for the kiwi dollar likely to be the Reserve Bank of Australia tomorrow and the New Zealand central bank on Thursday. The RBA is forecast to cut its cash rate a quarter points to 3 percent, ahead of third-quarter economic growth figures on Wednesday, while the RBNZ is expected to keep the official cash rate unchanged at a record low 2.5 percent.

“There’s no obvious directional clue for the week ahead,” said Imre Speizer, senior markets strategist at Westpac Banking Corp. “There’s a plethora of event risk both globally and locally. Probably the negatives will outweigh the positives, led by the fiscal cliff.”

US House of Representatives Speaker and senior Republican John Boehner told Fox News at the weekend that talks on averting the fiscal cliff – US$607 billion of spending cuts and tax hikes that kick in on Jan. 1 - were “nowhere.” Republicans and the White House have been trading blame over the lack of progress in heading off an event that could push the US into recession.

“Politicians are really deciding the direction of markets at the moment,” said Derek Rankin, director at Rankin Treasury Advisory. “The ability of economics to move markets is much more subdued.”

Traders will also be watching the ANZ Commodity Price Index release tomorrow and the latest GlobalDairyTrade auction, whose results will be published on Wednesday.

US payrolls round out the week. The US economy added 90,000 jobs last month, the smallest gain since June, according to a Bloomberg survey. Jobs growth is expected to have been hampered by disruptions from Hurricane Sandy.

Traders are pricing in an 80 percent chance of an RBA rate cut tomorrow even after capital spending figures showed investment in the resources sector isn’t drying up as expected. The rate cut will narrow the gap with New Zealand interest rates, though traders said some of that was already priced into the cross rate.

The kiwi dollar recently traded at 78.52 Australian cents, having climbed to as high as 80.81 cents in early October. Australian gross domestic product for the third quarter, out Wednesday, is expected to show the economy maintained its pace at 0.6 percent, while figures today may show growth in retail sales slowed to 0.4 percent in October, according to a Reuters survey.

“The fundamentals in Australia are clearly weakening,” said Mike Jones, strategist at Bank of New Zealand.

He has a positive bias for the kiwi this week on the basis that the RBNZ won’t be as dovish as some in the market are expecting. He noted that implied volatility for the New Zealand dollar is at 15-year lows and the kiwi has been trading in its tightest range for two years though event risk this week could see it test that range.

“If it’s going to happen it’s going to happen this week,” he said.

The kiwi dollar is close to an eight-month high against the yen, trading recently at 67.51 yen, with the possibility of further gains this month, said Rankin.

Japanese elections on Dec. 16 are expected to hand victory to the opposition LDP party, which has vowed to weaken the yen even if it means interest rates go negative. If that happens, “the carry trade will go through the roof and exporters to Japan will be under enormous pressure,” he said.

Alex Sinton, senior dealer at ANZ New Zealand, said he expects RBNZ governor Graeme Wheeler to cite the impact of a high New Zealand dollar in his assessment in the MPS even though “there’s little they can do about it.”

He said one thing in the kiwi’s favour was a historical seasonality for the currency, which typically appreciates in mid-December. Still, he would be surprised if the currency doesn’t finish the week “a little bit lower.”

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Scoop Business: RBNZ Starts Talks On Tougher Rules For Property Speculators

The Reserve Bank of New Zealand is stepping up preparations to restrict lending to residential property investors as it watches house prices, particularly in Auckland, continue to rise strongly. More>>

ALSO:

Research: ‘Ageing Well’ Science Challenge Launched

Science and Innovation Minister Steven Joyce today launched the Ageing Well National Science Challenge, confirming initial funding of $14.6 million. More>>

ALSO:

Scoop Business: Govt Resisting Pressure To Pump More Cash Into Solid Energy

Prime Minister John Key says it is “not the government’s preferred option” to make a fresh capital injection into the troubled state-owned coal miner, Solid Energy, but dodged journalists’ questions at his weekly press conference on whether that might prove necessary... More>>

ALSO:

Lagest Ever Privacy Breach Award: NZCU Baywide Accepts “Severe” Censure In Cake Case

NZCU Baywide says that once it was found to have committed a breach of a former staff member’s privacy, it had attempted to resolve the matter... the censure and remedies for its actions taken almost three years ago are “severe” but accepted, and will hopefully draw a line under the matter. More>>

ALSO:

Scoop Business: PayPal Stops Processing Mega Payments; NZX Listing Still On

PayPal has ceased processing payments for Mega, the file storage and encryption firm looking to join the New Zealand stock market via a reverse listing of TRS Investments, amid claims it is not a legitimate cloud storage service. More>>

ALSO:

Housing Policy: Auckland Densification As Popular As Ebola, English Says

Finance Minister Bill English said calls by the Reserve Bank Governor for more densification in Auckland’s housing were “about as popular in parts of Auckland as Ebola” would be. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news