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

 

Crowdfinding: Awaroa Beach To Become Public Land If Appeal Succeeds

Conservation Minister Maggie Barry says a privately-owned beach will become part of the Abel Tasman National Park if an online crowdfunding campaign to buy it succeeds... More>>

ALSO:

Meat Workers Union: Waitangi Mondayisation Flaunted By Large Employer Of Maori

At the AFFCO Talley owned meat plant in Rangiuru, the company has resorted to bullying and threats... saying they could be disciplined and their union sued for an unlawful strike if workers exercise their rights to a paid day off tomorrow. More>>

Earlier:

ETS Review: Modelling Documents Released

Three technical documents are being released to help New Zealanders engage with the Emissions Trading Scheme (ETS) review, Climate Change Minister Paula Bennett says. More>>

ALSO:

Northland: Govt Plan Targets Transport, Web, Maori Assets

The government has released a 10-year plan to attract investors and lift economic growth in Northland, a region that perennially underperforms the rest of the country even while being endowed with natural beauty, productive land, minerals, a potential workforce, scope for manufacturing, forestry and aquaculture, and proximity to Auckland. More>>

ALSO:

Statistics: Unemployment Rate Falls To 5.3 Percent

The unemployment rate fell to 5.3 percent in the December 2015 quarter (from 6.0 percent), Statistics New Zealand said today. This is the lowest unemployment rate since March 2009. There were 16,000 fewer people unemployed than in the September ... More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news