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.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Scoop Business: RBNZ Keeps OCR At 3.5%, Signals Slower Pace Of Future Hikes

Reserve Bank governor Graeme Wheeler kept the official cash rate at 3.5 percent and signalled he won’t be as aggressive with future rate hikes as previously thought as inflation remains tamer than expected. The kiwi dollar fell to a seven-month low. More>>

ALSO:

Weather: Dry Spells Take Hold In South Island

Many areas in the South Island are tracking towards record dry spells as relatively warm, dry weather that began in mid-August continues... for some South Island places, the current period of fine weather is quite rare. More>>

ALSO:

Scoop Business: Productivity Commission To Look At Housing Land Supply

The Productivity Commission is to expand on its housing affordability report with an investigation into improving land supply and development capacity, particularly in areas with strong population growth. More>>

ALSO:

Forestry: Man Charged After 2013 Death

Levin Police have arrested and charged a man with manslaughter in relation to the death of Lincoln Kidd who was killed during a tree felling operation on 19 December 2013. More>>

ALSO:

Smells Like Justice: Dairy Company Fined Over Odour

Dairy company fined over odour Dairy supply company Open Country Dairy Limited has been convicted and fined more than $35,000 for discharging objectionable odour from its Waharoa factory at the time of last year’s ”spring flush” when milk supply was high. More>>

Scoop Business: Dairy Product Prices Decline To Lowest Since July 2012

Dairy product prices dropped to the lowest level since July 2012 in the latest GlobalDairyTrade auction, led by a slump in rennet casein and butter milk powder. More>>

ALSO:

SOE Results: TVNZ Lifts Annual Profit 25% On Flat Ad Revenue, Quits Igloo

Television New Zealand, the state-owned broadcaster, lifted annual profit 25 percent, ahead of forecast and despite a dip in advertising revenue, while quitting its stake in the pay-TV Igloo joint venture with Sky Network Television. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

Standards New Zealand

Mosh Social Media
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news