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


NZ dollar may fall in second quarter, benefitting exporters

NZ dollar may fall in 2Q, benefitting winemakers, exporters, in face of US recovery

By Tina Morrison

April 1 (BusinessDesk) – The New Zealand dollar may weaken in the second quarter, benefitting exporters such as wine makers grappling with a bumper harvest, as economic recovery and a wind-down of stimulus in the US helps lift the greenback.

The kiwi, which recently traded at 86.73 US cents, may slip to 84 cents by the end of June 30 as higher local interest rates are offset by a strengthening US economy, according to the median forecast in a BusinessDesk survey of 15 currency traders and strategists.

A lower currency would benefit wine growers who are about half way through their harvesting period, which stretches from late February to early May. Specialist rural bank Rabobank expects New Zealand’s wine crop and exports to surpass previous records this year on favourable growing conditions and strong demand from the UK, Australian and US markets.

Foley Family Wines “is concerned about the consequence of the continuing high exchange rates and the very large forecast volumes from the 2014 harvest and the impact that this will have on the industry as a whole in terms of wine sales volumes and prices,” chief executive Mark Turnbull said after the release of the company’s first-half earnings.

The Marlborough-based wine company posted a 21 percent drop in revenue in the six months ended Dec. 31, as adverse exchange rate movements crimped export sales compared to sales a year earlier that were boosted by the clearance of large amounts of bulk and bottled wine following a merger.

NZAX-listed Foley Family Wines, which produces Te Kairanga, Grove Mill, Vavasour, Clifford Bay, Dashwood and Goldwater wines, is mainly exposed to US dollars, British pounds, Australian dollars and the Euro, according to its most recent annual accounts. A 10 percent decline in the New Zealand dollar against the US dollar would increase the company’s profit before tax and equity by $182,000, it said.

The New Zealand dollar will trend lower along with other major currencies as a recovery in the US and the winding back of stimulus programmes strengthens the greenback, traders said.

“It has taken awhile for people to realise that the kiwi tap is being turned off and we are going to see an appreciation of the US dollar,” said Tim Kelleher, ASB Bank head of institutional FX sales.

Still, the kiwi’s decline will be limited as higher local interest rates increase its yield appeal for overseas investors. Reserve Bank governor Graeme Wheeler hiked the official cash rate from a record low last month and expects to raise the OCR another 2 percentage points over the next two years.

Traders are betting there is a 96 percent chance Wheeler will hike rates again at the central bank’s April 24 meeting, according to the Overnight Index Swap curve.

“We could definitely get another rate hike in April,” said ASB’s Kelleher. “If we weren’t getting a rate hike then it might be a little bit lower. The kiwi is going to hold up longer because of the rate hike.”

Expectations for the New Zealand dollar at the end of the quarter range from 78.90 US cents to 89 cents, according to the BusinessDesk survey taken March 24-25. The kiwi rose 5.9 percent against the greenback in the three months ended March 31.

The survey shows the trade-weighted index, which tracks New Zealand’s currency against those of Australia, Japan, the US, the UK and the euro area, will likely weaken to 79 from 80.95 currently. Expectations range from 75.1 to 81, according to 12 respondents. That compares with the Reserve Bank’s expectation for the TWI to average 78.4 over the quarter, according to its latest forecast published March 13.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Trade: NZ Trade Deficit Widens To A Record In September

Oct. 27 (BusinessDesk) - New Zealand's monthly trade deficit widened to a record in September as meat exports dropped to their lowest level in more than three years. More>>


Animal Welfare: Cruel Practices Condemned By DairyNZ Chief

DairyNZ chief executive Tim Mackle says cruel and illegal practices are not in any way condoned or accepted by the industry as part of dairy farming.

Tim says the video released today by Farmwatch shows some footage of transport companies and their workers, as well as some unacceptable behaviour by farmers of dragging calves. More>>


Postnatal Depression: 'The Thief That Steals Motherhood' - Alison McCulloch

Post-natal depression is a sly and cruel illness, described by one expert as ‘the thief that steals motherhood’, it creeps up on its victims, hiding behind the stress and exhaustion of being a new parent, catching many women unaware and unprepared. More>>


DIY: Kiwi Ingenuity And Masking Tape Saves Chick

Kiwi ingenuity and masking tape has saved a Kiwi chick after its egg was badly damaged endangering the chick's life. The egg was delivered to Kiwi Encounter at Rainbow Springs in Rotorua 14 days ago by a DOC worker with a large hole in its shell and against all odds has just successfully hatched. More>>


International Trade: Key To Lead Mission To India; ASEAN FTA Review Announced

Prime Minister John Key will lead a trade delegation to India next week, saying the pursuit of a free trade agreement with the protectionist giant is "the primary reason we're going" but playing down the likelihood of early progress. More>>



MYOB: Digital Signatures Go Live

From today, Inland Revenue will begin accepting “digital signatures”, saving businesses and their accountants a huge amount of administration time and further reducing the need for pen and paper in the workplace. More>>

Oil Searches: Norway's Statoil Quits Reinga Basin

Statoil, the Norwegian state-owned oil company, has given up oil and gas exploration in Northland's Reinga Basin, saying the probably of a find was 'too low'. More>>


Modern Living: Auckland Development Blowouts Reminiscent Of Run Up To GFC

The collapse of property developments in Auckland is "almost groundhog day" to the run-up of the global financial crisis in 2007/2008 as banks refuse to fund projects due to blowouts in construction and labour costs, says John Kensington, the author of KPMG's Financial Institutions Performance Survey. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news