Businesses expect the NZD/USD to peak soon
ASB Institutional Kiwi Dollar Barometer
Businesses expect the NZD/USD to peak
• Businesses expect the NZD/USD to peak in June this year, at around 87 cents.
• Around 60 percent of exporters decreasing hiring and investment as a result of high NZD/USD.
• NZ businesses becoming more engaged in managing foreign exchange risk.
According to the latest ASB Institutional Kiwi Dollar Barometer, New Zealand businesses expect the NZD/USD to peak at around 87 cents in June.
ASB Chief Economist Nick Tuffley says, “While importers remain less cautious than exporters about the NZD, the divergence in NZD expectations between importers and exporters has narrowed over the past quarter. Across the businesses surveyed, average expectations are for the NZD/USD to peak at 0.869 in June this year, before easing to 0.829 by March next year.”
The strong currency over the past quarter has encouraged 62.2% of importers to indicate they are likely to increase hiring and investment. Conversely, 58.8% of exporters indicate they are looking to reduce hiring and investment in response to the high NZD. “These results are intuitive, given a high NZD tends to benefit importers by making them more competitive in NZ markets. On the flipside, a high currency reduces NZD returns for exporters which is clearly prompting them to take a more conservative stance in terms of their hiring and investment plans.”
The Barometer finds interest to hedge foreign exchange exposure continuing to increase. “This suggests NZ businesses are becoming more engaged with managing foreign exchange risk.”
Mr Tuffley comments that larger businesses continue to hedge a greater proportion of their FX exposure than their smaller counterparts. “While larger businesses tend to have more formal hedging policies in place, there is increasing scope for small and medium-sized businesses to benefit from increasing their hedging capabilities”.
Note to editors
The ASB Institutional Kiwi Dollar Barometer tracks exporters’ and importers’ exposures to foreign exchange risk, through surveying businesses with annual turnover of at least NZ$1 million. The Barometer also surveys businesses’ expectations for the NZD/USD and businesses’ hedging plans for managing foreign exchange risk. For the March 2013 edition of the ASB Kiwi Dollar Barometer, East & Partners interviewed 374 businesses turning over at least NZ$1 million per year. The interviews were conducted between 1st and 8th February. Businesses were asked a range of questions about their exposure to and views about the NZD.
full ASB Institutional Kiwi Dollar Barometer report is
attached, and will be available online on 13 March 2013.