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: Leighton-Led WGP To Build, Manage Transmission Gully

The Wellington Gateway Partnership, led by a unit of ASX-listed Leighton Holdings, has won the $1 billion contract to build the Transmission Gully road north of Wellington. More>>

ALSO:

Gareth Morgan: The Government’s Fresh Water Policy – Revisited

Fresh water quality is the latest area to be in the sights of Gareth Morgan and his research organisation The Morgan Foundation... They found that the fresh water policy was a bit murkier than the Environment Minister let on. More>>

ALSO:

Interest Rates: RBNZ Hikes OCR To 3.5%, ‘Period Of Assessment’ Now Needed

Reserve Bank governor Graeme Wheeler raised the official cash rate as expected, while signalling a pause in rate hikes to assess the impact of moves so far this year. The kiwi dollar sank after Wheeler said its strength was “unjustified” and that the currency could have “a significant fall.” More>>

ALSO:

Fonterra: Canpac Site 'Resize' To Focus More On Paediatrics

Fonterra is looking at realigning its packing operations at Canpac, in the Waikato, to focus more on paediatric nutritionals... The proposed changes could mean around 110 roles may not be required at the site which currently employs 330. More>>

ALSO:

Scoop Business: Postie Plus Brand Gets 2nd Chance With Well-Funded Pepkor

The Postie Plus brand is getting a new lease of life after South Africa’s Pepkor bought the failed retailer’s assets out of administration and said it will use its purchasing power to reduce costs of stock and fatten margins. More>>

ALSO:

Warming: Warming Signs From State Of Climate Report

Climate data from air, land, sea and ice in 2013 'reflect trends of a warming planet' -- says the latest State of the Climate report, launched by U.S. and New Zealand scientists. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

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