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


Internet: NZ Govt Lifts Target Speeds For Rural Broadband

The government has lifted its expectations on faster broadband speeds for rural New Zealand as it targets increased spending on research and development in the country's information and communications technology sector, which it sees as a key driver for export growth. More>>


Banks: Westpac Keeps Core Government Transactions Contract

The local arm of Westpac Banking Corp has kept its contract with the New Zealand government to provide core transactions, but will have to share peripheral services with its rivals. More>>


Science Investment Plan: Universities Welcome Statement

Universities New Zealand has welcomed the National Statement of Science Investment released by the Government today... this is a critical document as it sets out the Government’s ten-year strategic direction that will guide future investment in New Zealand’s science system. More>>


Scouring: Cavalier Merger Would Extract 'Monopoly Rents' - Godfrey Hirst

A merger of Cavalier Wool Holdings and New Zealand Wool Services International's two wool scouring operations would create a monopoly, says carpet maker Godfrey Hirst. The Commerce Commission on Friday released its second draft determination on the merger, maintaining its view that the public benefits would outweigh the loss of competition. More>>


Scoop Review Of Books: She Means Business

As Foreman says in her conclusion, this is a business book. It opens with a brief biographical section followed by a collection of interesting tips for entrepreneurs... More>>


Hourly Wage Gap Grows: Gender Pay Gap Still Fixed At Fourteen Percent

“The totally unchanged pay gap is a slap in the face for women, families and the economy,” says Coalition spokesperson, Angela McLeod. Even worse, Māori and Pacific women face an outrageous pay gap of 28% and 33% when compared with the pay packets of Pākehā men. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news