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NZ Dollar Outlook: kiwi to fall on US growth doubts

Monday 26th March 2012

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The New Zealand dollar may fall as investors search for fresh clues on the pace of the US economy and what that means for global growth.

The New Zealand dollar recently traded at 81.75 US cents up from 81.65 at 8am this morning. That’s right in the middle of this week’s range of 80.50 cents to 83 cents, according to a BusinessDesk survey of five analysts. All of the analysts surveyed predict the New Zealand dollar will finish the week lower.

Investors’ risk appetite has lost some of its heat, with data out of the US looking set to undermine optimism the world’s biggest economy is in increasingly better shape. Pending home sales are set for release on Monday, consumer confidence on Tuesday and durable goods orders on Wednesday.

There will be the final reading for gross domestic product for the fourth quarter on Thursday, followed by a further consumer sentiment survey on Friday.

“The kiwi will come under pressure this week about worries in the US recovery,” said Peter Cavanaugh, senior client adviser at Bancorp. “A consistent factor seems to be that there is profit taking before 31 March – with the offshore influence and end of quarter positions dominating.”

Economists polled by Bloomberg are expecting that orders for long-lasting factory goods rose 3 percent in February after dropping 3.7 percent in January, and that personal spending increased 0.6 percent last month, boosted in part by stronger auto sales.

“Weaker US data will push interest rates and the US currency down but it’s what it will do to the kiwi/US dollar,” said Imre Speizer, market strategist at Westpac Banking Corp. “Probably over the week the kiwi will end up a bit lower overall.”

Investors will also be looking to Spain as the debt-laden country details its budget plans on Friday. Last week the yields on Spanish 10-year bonds increased 19 basis points to 5.39 percent, on concern that the government may not meet budget deficit targets.

“The euro has been off the radar for a while and it will probably creep back on this week,” said Mike Jones, market strategist at Bank of New Zealand. “European Union leaders are doing their best to play down any excitement with Spain - if it is not managed carefully it has every chance of becoming the next Greece.”

European Union finance ministers will meet in Copenhagen on Friday where it is expected they will decide on plans to shore up the region’s 500 billion euro rescue fund. Preliminary inflation data for Germany is also set for release on Wednesday, followed by euro-zone Consumer Price Index figures on Friday.

In New Zealand, overseas merchandise trade for February was released this morning. It showed a surplus of $161 million, turning from a revised deficit of $159 million a month earlier, according to Statistics New Zealand. Though the government statistician said weaker than expected imports and exports may have been impacted by escalating industrial action around the country.

The National employment indicator for January is scheduled for release by Statistics New Zealand on Tuesday, followed by building consents for February on Friday. The National Bank of New Zealand Regional Business Outlook survey is due out on Thursday.

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