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

 


NZ Dollar Outlook: Kiwi may extend gain on demand for growth

NZ Dollar Outlook: Kiwi may extend gains on demand for growth assets, yield

Feb. 4 (BusinessDesk) – The New Zealand dollar may extend its gains this week on rallying equity markets, offshore demand for yield and a favourable outlook for the local economy.

The kiwi dollar recently traded at 84.53 US cents and earlier rose to 84.92 cents. It may trade in a range of 83.50 cents to 85.50 cents this week with a bias to the topside, according to a BusinessDesk survey of five traders and strategists.

The Dow Jones Industrial Average reached a five-year high in New York on Friday, helped by figures showing the world’s biggest economy stacked on jobs in January, even as the unemployment rate increased. New Zealand’s NZX 50 Index reached a six-year high last week. With the US and Japan keeping interest rates low and printing money, more investors are looking Downunder for better returns.

“The yield good news story is coming to fruition,” said Peter Cavanaugh, senior client adviser at Bancorp Treasury Services. As well, “equity markets are starting to price in some tremendous optimism. While it is overdone, there’s a risk of some more topside.”

Figures on Thursday are expected to show the unemployment rate fell to 7.1 percent in the fourth quarter from 7.3 percent, based on a Reuters survey of 10 economists, while the economy added jobs. Growth in the labour market is set to continue as Christchurch embarks on its massive rebuild of a CBD levelled by earthquakes.

“The domestic economic outlook remains strong and that’s clearly supportive of a higher kiwi,” said Imre Speizer, senior markets strategist at Westpac Banking Corp. “Globally, financial conditions have well and truly stabilised. It’s no surprise then, given that mix that markets are buying risky currencies” such as the New Zealand dollar.

Speizer is predicting the kiwi will reach 85.70 US cents over the next few weeks and may chart a record high of 90 cents in the next six months.

Investors have also been digesting last week’s update from the Reserve Bank on monetary conditions. Governor Graeme Wheeler kept the official cash rate at 2.5 percent, while noting a pickup in the economy and voicing concern over a housing market that is gathering steam.

“There are no rate cuts priced into the New Zealand dollar,” said Tim Kelleher, head of institutional FX sales at ASB Institutional. “Interest rates are driving currencies at the moment.”

He noted that New Zealand 10-year bonds are yielding more than there Australian counterparts currently and there’s still expectation the Reserve Bank of Australia will cut its cash rate from 3 percent in coming months, though the RBA is likely to stand pat tomorrow.

That’s the prevailing view in a Reuters survey of 23 economists though some are still calling for a quarter-point cut.

The kiwi dollar recently traded at 81.39 Australian cents, near the highest in about 2 ½ years and has started “a sustained uptrend,” according to Bank of New Zealand strategist Mike Jones.

“The RBA will be the big one this week,” Jones said. “The risk is they hold interest rates which could see the Aussie push higher and provide for a bit of a pause” in the kiwi dollar’s gains, he said.

There’s still support for the kiwi, though, with exporters looking to buy on dips, he said.

The trade-weighted index was recently at 76.16, near a five-year high.

Derek Rankin of Rankin Treasury Advisory says the New Zealand dollar is being driven by events beyond Australia and New Zealand.

“The driving pressure here is the fact that the Americans and Japanese are printing money,” he said. “Capital has to find yield – share markets and high-yielding currencies are both going up.”

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

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:

Crown Accounts: NZ Government Deficit Smaller Than Expected In First Half

The New Zealand government's operating deficit was smaller than expected in the first six months of the financial year, as the consumption and corporate tax take rose ahead of forecast in December, having lagged estimates in previous months. More>>

ALSO:

Fruit & Veg Crackdown: Auckland Fruit Fly Find Under Investigation

The Ministry for Primary Industries (MPI) is investigating a find of a single male Queensland fruit fly in a surveillance trap in the Auckland suburb of Grey Lynn... MPI has placed legal controls on the movement of fruit and some vegetables outside of a defined circular area which extends 1.5km from where the fly was trapped in Grey Lynn. More>>

ALSO:

Scoop Business: Westpac NZ Reaches $2.97M Swaps Settlement

Westpac Banking Corp’s New Zealand unit has agreed to pay $2.97 million in a settlement with the Commerce Commission over the way the bank sold interest rate swaps to farmers between 2005 and 2012. More>>

ALSO:

Going Dutch: Fonterra Kicks Off $144M Partnership With Dutch Cheese Maker

Fonterra Co-operative Group, the world’s largest dairy exporter, has commissioned a new dairy ingredients plant in Heerenveen, in the north of the Netherlands, its first wholly-owned and operated ingredients plant in Europe. More>>

ALSO:

Scoop Business: NZ Retail Sales Beat Estimates

New Zealand retail sales rose more than expected in the fourth quarter, led by vehicle-related transactions, food and beverages, adding to evidence that cheap credit and a growing jobs market are encouraging consumers to spend. More>>

ALSO:

Delivery Cuts Go Ahead: 'Government Money Grab' From NZ Post

"It's a money grab by the Government as the shareholder of New Zealand Post" says Postal Workers Union advocate Graeme Clarke about the changes announced by NZ Post. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

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