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

 

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