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.”


© Scoop Media

Business Headlines | Sci-Tech Headlines


Shocking Dairy Footage: MPI Failing Our Animals And Damaging Our Reputation

Greens “Nathan Guy needs to urgently look into how his ministry is enforcing animal welfare standards, how these appalling incidents happened under its watch and what it’s going to do prevent similar incidents happening again in the future." More>>


Land & Water Forum: Fourth Report On Water Management

The Land and Water Forum (LWF) today published its fourth report, outlining 60 new consensus recommendations for how New Zealand should improve its management of fresh water and calling on the Government to urgently adopt all of its recommendations from earlier reports. More>>



Welcome Home: Record High Migration Stokes 41-Year High Population Growth

New Zealand annual net migration hit a new high in October as more people arrived from than departed for Australia for the first time in more than 20 years. More>>


Citizens' Advice Bureau: Report Shows Desperate Housing Situation Throughout NZ

CAB's in-depth analysis of over 2000 client enquiries about emergency accommodation shows vulnerable families, pregnant women and children living in cars and garages, even after seeking assistance from the Ministry of Social Development and Housing New Zealand. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news