Where to next for the Kiwi dollar?

Milford Asset Management Portfolio Manager Mark Riggall has been tracking the shrinking Kiwi dollar and says there is scope for it to fall further yet.

“I’m not ruling out our dollar falling to 60 cents against the US dollar by any means. The dollar has been falling reasonably steadily against the US dollar since the beginning of last year. The big change over that period has been the change in interest rates in both countries. Although in the medium term the New Zealand economy looks like it’s going to continue to slow, there are issues with the American economy too, so medium term it’s probably a sideways trend for our dollar, albeit within a fairly wide range.”

However, if the Kiwi dollar continues to slide inexorably down, rather than staying in a sideways trend against the US, alarm bells will start to ring.

“A modest fall in the New Zealand dollar is actually something which is potentially positive for New Zealand assets, including shares, and that’s because in foreign currencies they look cheaper. However, if the Kiwi dollar was to slide more sharply from here, that would likely signify a more rapid deterioration in the economy, even after the fact that we’ve had significant easing from the Reserve Bank. That would certainly ring alarm bells.”

Although the low dollar is broadly good for New Zealand exporters, Mark Riggall isn’t seeing it boosting the bottom line of our inbound tourism industry.

“We haven’t seen enough meaningful evidence that tourism has turned a corner in terms of picking up the pace of growth that we saw a couple of years back, particularly with regard to the Chinese tourists that come here. So, at the moment nothing has really changed in terms of our view of any of the tourism stocks.”

You can view Mark’s interview discussing these and other issues relating to the state of the Kiwi dollar if you click here.

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