NZ Dollar Outlook: Traders split on direction for kiwi this week
By Tina Morrison
June 23 (BusinessDesk) - The New Zealand dollar may struggle for direction this week as traders weigh the latest overseas and local growth indicators.
The local currency may trade between 85 US cents and 88.20 cents this week, according to a BusinessDesk survey of 10 traders and strategists, who are split on the kiwi's trajectory this week. Four expect the currency to decline, three predict it will gain and three pick it to remain largely unchanged. It recently traded at 87.19 US cents.
New Zealand's economic strength and rising interest rates mean the nation's currency remains in demand with international investors seeking higher yields, even as the Reserve Bank says softer commodity prices should be weighing on the kiwi. Meantime in the US, a faltering economic recovery will probably see first quarter GDP revised down by as much as negative 2 percent, from an initial estimate of negative 1 percent, analysts said.
"We are raising interest rates and we have got more interest rate increases to come yet," said Derek Rankin, director at Rankin Treasury Advisory. "We have got a rising tide. Offshore investment is just seeping in gradually into New Zealand. The New Zealand dollar is going to gradually creep higher. Yield demand is going to be a constant driver, it's not really going to go away."
In the US this week, all eyes will be on the first quarter GDP data on Wednesday and a May inflation indicator on Thursday, which is followed by the Federal Reserve.
Rankin said US economic data has been distorted by severe winter weather and a drought on the west coast.
"I am on the side of the fence that it is actually worse than it should be, it is not just the weather," Rankin said. "I think the US economy is actually struggling to get lift off and the reason for that is because people aren't getting paid any more."
In New Zealand this week, the overseas merchandise trade balance is scheduled for release on Friday, with some analysts saying it may start to show the effect of falling commodity prices.
Elsewhere, the German IFO business confidence survey released tomorrow will be watched for signs of sentiment in Europe.
China's flash HSBC PMI manufacturing data released today improved more than expected to 50.8 from 49.4 last month, compared with forecasts of 49.7. A reading above 50 indicates expansion. Eurozone and US PMIs are released tonight.