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

 

Finance: Major Campaign To End "Gross Overtaxation Of Savings"

The campaign – which includes a special web site through which New Zealanders can e-mail their own and other MPs and party leaders – is backed by Age Concern, Consumer NZ, the Financial Services Council and the Taxpayers’ Union. More>>

ALSO:

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:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

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