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NZ dollar faces more downside as improving US economy spurs greenback supporters

Friday 24th May 2013

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The New Zealand dollar will likely fall below 80 US cents next week as an improving US economy and growing speculation the Federal Reserve will start unwinding its asset purchase programme spurred supporters for the greenback.

The kiwi is heading for a 0.4 weekly gain, trading at 80.93 US cents at 5pm in Wellington from 81.45 cents at 8am, and 80.26 cents yesterday. The trade-weighted index rose to 76.35 from 76.06 yesterday and is heading for a 0.2 percent weekly decline.

A BusinessDesk survey of five strategists on Monday predicted the kiwi would trade in a range of 79.20 US cents to 83 US cents this week, with a downside bias.

The kiwi fell to an eight-and-a-half month low 80.04 US cents this week amid growing speculation the Fed would start winding back its $85 billion a month quantitative easing programme. Chairman Ben Bernanke told politicians on Wednesday that would happen if the labour data showed signs of improvement.

“The trend is still down in the kiwi with the US dollar driving the move,” said Michael Johnston, director of foreign exchange at HiFX in Auckland. “I certainly think the kiwi will fall further. We’re looking for at least 78 US cents.”

Local trade figures showed a smaller surplus than expected at $157 million last month, as a flood of petrol imports offset gains in meat exports.

The kiwi rose to a three-and-a-half year high against the Australian dollar, trading at 83.58 cents at 5pm from 83.21 cents yesterday, and heading for a 0.9 percent weekly gain.

HiFX’s Johnston said the cross-rate is still moving in the kiwi dollar’s favour and he’s projecting it will reach 85 Australian cents in the coming months, with the Australian central bank more likely to cut rates and New Zealand’s showing a bias for higher rates.

The kiwi fell to 82.03 yen from 82.44 yen yesterday and advanced to 62.60 euro cents from 62.46 cents. It increased to 53.60 British pence from 53.39 pence yesterday.

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