NZ dollar holds above 57 US cents ahead of GDP

NZ dollar holds above 57 US cents ahead of GDP, US stock rise

By Paul McBeth

March 27 – The New Zealand dollar held above 57 U.S. cents ahead of today’s gross domestic product figures, which may show the economy bottomed out in the three months to Dec. 31, and after U.S. stocks rallied on optimism the world’s biggest economy has hit its trough.

New Zealand’s economy probably shrank 1% in the fourth quarter, according to a Reuters survey of economists, its fourth consecutive contraction. The GDP data follows figures yesterday that showed the current account deficit widened to NZ$16.1 billion in the fourth quarter, equal to 8.9% of GDP. Wall Street staged a rally on optimism a 6.3% contraction in fourth-quarter GDP may be the worst of it. The Dow Jones Industrial Average rose 2.3% on optimism the global economy is rebounding from its nadir.

“In the wake of better-than-expected trade flows in the data yesterday, we've tweaked our expenditure GDP measure to -0.8%,” said Danica Hampton, currency strategist at Bank of New Zealand. “Sharp moves higher [by the kiwi] in recent days attracted the attention of both FX traders as well as Asian investors hungry for yield and a home for surplus cash funds.”

The kiwi fell to 57.45 U.S. cents from 57.96 cents yesterday, and dropped to 56.78 yen from 56.84 yen. It slid to 81.83 Australian cents from 82.60 cents yesterday, and declined to 42.56 euro cents from 42.66 cents.

Hampton said traders may buy the kiwi if it falls back to 57.25 U.S. cents to 57.50 cents, provided the GDP figures don’t shock the market.

The International Monetary Fund’s positive assessment of New Zealand’s economy helped lift sentiment, noting it’s “in a better position than most advanced countries to face the global storm” despite the weak outlook in the near-term. The sharp fall in the kiwi had brought it “broadly in line with fundamentals, and should lead to a narrowing of the current account deficit,” the preliminary report said.

(Businesswire)

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