NZ dollar climbs from 5-month low ahead of budget that's expected to be relatively upbeat
By Paul McBeth
May 17 (BusinessDesk) - The New Zealand dollar climbed from a five-month low ahead of the Labour-led government's first budget, which is expected to show a relatively upbeat economic and fiscal outlook.
The kiwi rose to 68.96 US cents as at 8am in Wellington from 68.64 cents yesterday, having dropped as low as 68.49 cents. The trade-weighted index rose to 72.30 from 72.01 yesterday.
Finance Minister Grant Roberston will unveil his first budget today, which will likely deliver a bigger tax take than anticipated, helping fund the government's spending promises. The introduction of GST on overseas purchases, tougher policing of tax rules, a slower track for debt repayment, and a razor gang approach to the previous administration's programme will support that spending. Meantime, the broader economy remains robust despite businesses remaining glum and the Treasury's forecasts will likely retain that outlook.
"It’s NZ budget day where the key messages are expected to be: an upbeat outlook for tax revenues and the general economic outlook; and the government can achieve its fiscal targets, but there will be some tough trade-offs for spending priorities," ANZ Bank New Zealand economists Con Williams and Phil Borkin said in a note. "Today’s budget will be watched closely, but is unlikely to dramatically alter the currency picture."
The main influence on the local currency has been the US economic outlook, with strong data bolstering expectations the Federal Reserve will have to raise interest rates more aggressively than anticipated. The yield on US 10-year Treasuries is at a seven-year high 3.10 percent.
Local data today also includes producer prices for the March quarter, while Australian employment figures will also be watched.
The kiwi traded at 91.74 Australian cents from 91.83 cents yesterday and rose to 4.3925 Chinese yuan from 4.3704 yuan. The local currency increased to 51.10 British pence from 58.01 pence yesterday and rose to 58.31 euro cents from 58.01 cents. The kiwi climbed to 76.07 yen from 75.68 yen yesterday.