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

 


Kiwi not expected to reach parity with A$ this year: poll

NZ dollar not expected to reach parity with Aussie this year, BusinessDesk poll shows

By Tina Morrison

Jan. 30 (BusinessDesk) – The New Zealand dollar, which touched an eight-year high against its Australian counterpart this month, is not expected to climb to parity in 2014 as a strong local currency dents exports and Australia’s economy picks up following the end of a mining boom.

Just three of 22 currency analysts and economists in a BusinessDesk poll expect the New Zealand currency to trade on a par with the Australian dollar this year. The New Zealand dollar recently traded at 93.87 Australian cents and reached 95.31 cents on Jan. 24, its highest since December 2005 when it touched a post-float high of 95.82 cents.

New Zealand’s currency has accelerated 17 percent against the Aussie in the past year, as a strengthening local economy contrasts with a slowdown in Australia. New Zealand Reserve Bank governor Graeme Wheeler signalled in his six-weekly review of interest rates today that a hike is likely to be needed “soon” to contain inflation, while in Australia Governor Glenn Stevens is considered less likely to cut interest rates further this year.

“As the RBNZ gets on with the job of tightening monetary conditions while the RBA remains on hold, the bias is for the NZD/AUD to head higher,” Bevan Graham, chief economist at AMP New Zealand, said in an emailed comment. “However our economics team in Australia thinks the RBA will be tightening from late third quarter/early fourth quarter this year, at which point we’d expect the cross to start heading lower.”

The two currencies were last at parity in 1973, when they were both fixed. Benchmark interest rates in both countries are at an historic low of 2.5 percent. The yield on New Zealand’s benchmark 10-year government bond was recently at 4.62 percent, almost 60 basis points higher than its Australian equivalent.

Australia’s central bank next reviews interest rates on Feb. 4. Analysts have pulled back their expectations for a rate cut in coming months following recent stronger data on inflation and business confidence.

Traders expect Australian interest rates to remain largely on hold this year, while the chance of a rate cut at next month’s meeting has fallen to 3 percent from 14 percent on Jan. 17, according to the Overnight Swap Curve. New Zealand’s Reserve Bank is expected to raise its benchmark rate at its next review in March after leaving it unchanged today.

The cross rate is already pricing in the benefits of a stronger New Zealand economy versus a weaker Australian economy with the kiwi at 95 Australian cents, said Peter Cavanaugh, client advisor at Bancorp Treasury.

A stronger local currency is likely to dent New Zealand’s manufacturing export and inbound tourism sectors, providing a self-dampener to parity, Cavanaugh said.

Australia is New Zealand’s second-largest trading partner after China, and the biggest source of short-term visitors.

Some analysts said there remained a small risk the currencies would trade evenly for a short period even though it was not their core view, should Chinese demand fall suddenly, the RBA turn very dovish or the RBNZ prove more hawkish than expected.

“While chatter of the cross moving to parity now abounds, we believe this is likely misplaced,” Kymberly Martin, markets strategist at Bank of New Zealand, said in a note today. “We continue to emphasise the cross is stretched relative to fundamental ‘fair value.”

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Must Sell 20 Petrol Stations: Z Cleared To Buy Caltex Assets

Z Energy is allowed to buy the Caltex and Challenge! petrol station chains but must sell 19 of its retail sites and one truck-stop, the Commerce Commission has ruled in a split decision that acknowledges possible retail price coordination between fuel retailers occurs in some regions. More>>

ALSO:

Huntly: Genesis Extends Life Of Coal-Fuelled Power Station To 2022

Genesis Energy will keep its two coal and gas-fired units at Huntly Power Station operating until 2022, having previously said they'd be closed by 2018, after wringing a high price from other electricity generators who wanted to keep them as back-up. More>>

ALSO:

Dammed If You Do: Ruataniwha Irrigation Scheme Hits Farmer Uptake Targets

Enough Hawke's Bay farmers have signed up for water from the proposed Ruataniwha Water Storage Scheme for it to go ahead as long as a cornerstone institutional capital investor can be found to back it, its regional council promoter announced. More>>

ALSO:

Reserve Bank: OCR Stays At 2.25%

Reserve Bank governor Graeme Wheeler kept the official cash rate at 2.25 percent, in a decision traders had said could go either way, while predicting inflation will pick up as the slump in oil prices washes out of the data and capacity pressures start to build in the economy. More>>

ALSO:

Export Values Down: NZ Posts Biggest Annual Trade Deficit In 7 Years

New Zealand has recorded its biggest annual trade deficit since April 2009, reflecting weaker prices of agricultural commodities such as dairy products, beef and lamb, and increased imports of vehicles and machinery. More>>

ALSO:

Currency Events: NZ's New $5 Note Wins International Banknote Award

New Zealand’s new Brighter Money $5 note has been named Banknote of the Year in a prestigious international competition. The $5 note was awarded the IBNS Banknote of the Year title at the International Bank Note Society’s annual meeting. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news