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

 


NZ dollar may decline in 3Q, prompting importers to hedge

NZ dollar may decline in third quarter, prompting importers to hedge ahead of Christmas

By Tina Morrison

July 10 (BusinessDesk) - The New Zealand dollar may weaken in the third quarter, prompting importers to buy the currency while it is hovering near record highs as they gear up for Christmas, their busiest season.

The kiwi, which today touched a fresh three-year high of 88.29 US cents, may slip to 85 cents by the end of September as higher local interest rates are offset by a strengthening US economy, according to the median forecast in a BusinessDesk survey of 18 currency traders and strategists.

For New Zealand retailers, a high local currency has been a benefit, enabling them to buy overseas merchandise at a lower cost which they can either pass on to consumers in the form of cheaper prices or retain to boost their margins and profits. Still, with the currency likely to decline from elevated levels, retailers such as Briscoe Group will be looking to lock in their currency rates at high levels so they have the best buying power possible heading into the busy Christmas season.

"We are a real beneficiary some days and get hurt other days by currency but certainly right now there are pretty bright sunny days at the moment with the currency where it is - it does give us some benefit but also it gives us the flexibility to sell some pretty nice merchandise at some pretty cheap prices as well," said Briscoe managing director Rod Duke, who says he has locked in options to buy the currency at favourable levels heading into the last four months of his financial year though January, where he typically makes 40 percent of annual sales.

"We certainly have a relatively high protectionist view of the currency and so I am fairly well hedged with just a small percentage left over that I can spot buy on because the most important thing for me of course is that I last longer than my competitors at these sort of levels," Duke said.

Briscoe Group, which includes the Briscoes Homewear, Rebel Sports and Living & Giving chains, has the flexibility on its balance sheet with cash in the bank and no debt to be able to buy currency to secure good rates, he said.

The New Zealand dollar is close to its post-float high of 88.40 US cents touched in August 2011 as investors are lured to the nation's higher yields as local interest rates rise while rates in most other major economies remain at record lows. The local currency is predicted to decline in the third quarter as a revival in the US turns investor attention to when interest rates will start increasing in the world's largest economy.

Expectations for the New Zealand dollar at the end of the third quarter range from 81 US cents to 91.50 cents, according to the BusinessDesk survey taken this week.

The survey shows the trade-weighted index, which tracks the New Zealand currency against those of Australia, Japan, the US, the UK and the euro area, will likely fall to 80 from 81.89 currently. Expectations in the BusinessDesk survey range from 78 to 85. That compares with the Reserve Bank's expectation for the TWI to average 79.7 over the quarter, according to its latest forecast published June 12.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Half Full: Dairy Payouts Steady, Cash Will Be Tight

Industry body DairyNZ is advising farmers to focus on strong cashflow management as they look ahead to the 2015-16 season following Fonterra's half-year results announcement today. More>>

ALSO:

First Union: Cotton On Plans To Use “Tea Break” Law

“The Prime Minister reassured New Zealanders that ‘post the passing of this law, will you all of a sudden find thousands of workers who are denied having a tea break? The answer is absolutely not’... Cotton On is proposing to remove tea and meal breaks for workers in its safety sensitive distribution centre. How long before other major chains try and follow suit?” More>>

ALSO:

Scoop Business: NZ-Korea FTA Signed Amid Spying, Lost Sovereignty Claims

A long-awaited free trade agreement between New Zealand and South Korea has been signed in Seoul by Prime Minister John Key and the Korean president, Park Geun-hye. More>>

ALSO:

PM Visit: NZ And Viet Nam Agree Ambitious Trade Target

New Zealand and Viet Nam have agreed an ambitious target of doubling two-way goods and service trade to around $2.2 billion by 2020, Prime Minister John Key has announced. More>>

ALSO:

Scoop Business: NZ Economy Grows 0.8% In Fourth Quarter

The New Zealand economy expanded in the fourth quarter as tourists drove growth in retailing and accommodation, and property sales increased demand for real estate services. More>>

ALSO:

Scoop Business: RBNZ’s Wheeler Keeps OCR On Hold, No Rate Hikes Ahead

The Reserve Bank has removed the prospect of future interest rate hikes from its forecast horizon as a strong kiwi dollar and cheap oil hold down inflation, and the central bank ponders whether to lower its assessment of where “neutral” interest rates should be. The kiwi dollar gained. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news