ASB tips Aussie dollar parity

ASB tips Aussie dollar parity

• Broad-based belief amongst businesses the NZD will moderate further during 2015.

• Nonetheless, the interest amongst importers to hedge continues to decline.

• For the first time there is very little difference between the NZD expectations of importers and exporters.

ASB economists have reconsidered their currency forecasts and are now predicting the NZD will reach parity with the AUD.

The forecast comes with the release of the latest ASB Kiwi Dollar Barometer, for the three months to March 2015.

The parity forecast now stands in contrast to findings in the Barometer given that most survey respondents, in early February, were convinced the Kiwi had peaked against the AUD or, that if it went any higher, it wouldn’t get above A97c.

In recent weeks however the NZD/AUD has traded above A99c.

ASB Chief Economist Nick Tuffley says there is a good chance the cross rate will reach parity.

A clear catalyst could be another RBA rate cut, which could come as early as today, when Australia’s official cash rate is reviewed,

“At the start of the year, most people didn’t think it would reach parity,” Mr Tuffley says.

“But recent events such as the Reserve Bank of Australia’s February rate cut and the resurgent NZD have led us to change our forecasts and we expect it will hit parity this year.”

The ASB Kiwi Dollar Barometer surveys corporate treasurers and financial controllers of large companies (with annual turnover of at least NZ$1 million) for their expectations for the NZD, hedging plans and exposure to foreign exchange risk.

Other findings of this quarter’s survey include:

• Broad-based belief amongst businesses the NZD will moderate further against the USD over the year ahead.

• In comparison to previous surveys, there is very little difference between the expectations of importers or exporters.

• Despite the widely-held expectation of further depreciation in the NZD, importers’ interest to hedge their foreign exchange exposure declined noticeably for the second quarter.

• Meanwhile, the percentage of exporters hedging their exposures has increased for the second quarter.

• The ASB Kiwi Dollar Barometer has consistently shown big businesses hedge almost all their foreign exchange exposures. In contrast, most of the observed changes in hedging intentions are driven by small and medium sized businesses.

In summary, a slightly smaller percentage of businesses are planning to hedge foreign exchange exposures now compared to earlier surveys. But of those businesses that do plan to hedge, the proportion of foreign exchange exposure being covered continues to lift.

The full ASB Kiwi Dollar Barometer report will be available online on at www.asb.co.nz

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