NZ dollar heads for 0.3% weekly decline as financial markets hang on Greece debt talks

Friday 26th June 2015

The New Zealand dollar is heading for a 0.3 percent weekly decline against the greenback as financial markets hang on the outcome of Greece's debt negotiations before its 1.6 billion euro loan comes due at the end of the month.

The kiwi fell to 68.86 US cents at 5pm in Wellington from 69.08 cents on Friday in New York last week. It traded at 69.02 cents at 8am and 69.15 cents yesterday. The trade weighted index declined to 71.94 from 72.19 yesterday, and is heading for a 0.2 percent increase on the week.

A BusinessDesk survey of 13 currency analysts on Monday predicted the kiwi would trade between 68 US cents and 71.20 cents this week. Six bet the currency would gain, four said it may remain relatively unchanged and three picked it to fall.

A meeting of eurozone finance ministers broke up without agreement on Greece and talks are set to resume Saturday morning. German Chancellor Angela Merkel warned that Germany would not be “blackmailed” and in a closed door meeting with her party members in Berlin, stressed a deal had to be done before financial markets opened on Monday. New Zealand is the first market to open on Monday.

"All eyes are on the weekend because we're going to have the Greek saga over the weekend and I still think there's a fair chance it gets kicked through to Tuesday," said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional in Auckland. If a deal can't be reached, that will sap investors' appetite for riskier assets such as equities, "and that feeds into a lower kiwi."

Kelleher said liquidity will probably be thin on Monday, meaning moves in the kiwi dollar could be exaggerated if Greece and its lenders can't strike a deal.

The kiwi was little changed at 61.55 euro cents at 5pm in Wellington from 61.69 cents yesterday, and is heading for a 1.2 percent weekly gain.

New Zealand data today showed the nation's annual trade balance shrank to $2.57 billion in the 12 months ended May 31, and was smaller than economists were picking due to a bigger increase in exports than expected.

Meantime, the Reserve Bank said the kiwi dollar was still unjustifiable and unsustainable, criteria for the regulator to intervene in currency markets. The RBNZ dropped those words when describing the kiwi in the June monetary policy statement, reintroducing them in its statement of intent, released today.

The central bank has been calling for a weaker currency, and governor Graeme Wheeler told politicians this month that he would expect a deteriorating terms of trade to have caused a depreciation in the kiwi.

New Zealand's two year swap rate was unchanged at 3.09 percent at 5pm in Wellington from yesterday, and the 10 year swap rate edged down to 3.93 percent from 3.94 percent.

The kiwi traded at 89.16 Australian cents from 89.27 cents yesterday, and fell to 4.2757 Chinese yuan from 4.2932 yuan. It dropped to 84.96 yen from 85.48 yen yesterday, and fell to 43.74 British pence from 44.05 pence.

BusinessDesk.co.nz

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