NZ Dollar Outlook: Kiwi may range trade in shortened Easter week

Monday 21st March 2016

The New Zealand dollar is unlikely to reach new highs or lows this week as it finds investor support at the top and bottom of its recent ranges.

The kiwi will probably trade between 65.80 US cents and 69.50 cents this week, according to 11 currency advisers surveyed by BusinessDesk. Four expect it to remain relatively unchanged, four bet it will rise and three say it will decline. It recently traded at 67.80 US cents.

The local currency has had a rollercoaster ride this month, dropping sharply after the Reserve Bank unexpectedly cut the benchmark interest rate then bouncing back up following the Federal Reserve's signal that it wouldn't hike US rates as fast as previously mooted, and then declining again. With no major New Zealand data scheduled this week, which is shortened by the upcoming Easter public holiday, the kiwi is likely to oscillate around its recent range with the country's relatively higher yields supporting it at the lower end of the range while it faces resistance above 69 US cents.

"We had some fairly dramatic moves last week which took the kiwi to the upper end of our current trading range and the pullback on Friday suggests that the momentum further forwards isn't quite there at this moment in time," said Stuart Ive, senior dealer, foreign exchange, at OMF. "It's a bit of a crouch and hold scenario ahead of the Easter break.

"We need more data, we need something that's going to take us one way or the other."

Economic data scheduled for release in New Zealand this week isn't expected to provide strong direction for the currency, he said.

That includes February tourism and migration numbers released today, which showed records continue to be broken, and merchandise trade data for the month due out Thursday. The Reserve Bank publishes credit card spending data for February today and details of high-debt mortgage lending for the month on Thursday.

Also of interest, Fonterra Cooperative Group, the country's largest company, publishes its first-half earnings on Wednesday. New Zealand markets will be closed Friday and Monday for Easter.

In the US, several Fed officials will be speaking this week, which may provide greater clarity for investors on the central bank’s revised path to higher US interest rates.

Richmond Fed president Jeffrey Lacker is on a panel with Bank of France governor Francois Villeroy de Galhau to discuss central bank outlooks in Paris today. Atlanta Fed boss Dennis Lockhart and St Louis Fed's James Bullard are also set to speak at separate events today, followed by Chicago Fed's Charles Evans and Philadelphia Fed's Patrick Harker on Tuesday. Bullard speaks again on Thursday.

The US releases its final estimate of fourth-quarter gross domestic product on Friday and also has reports this week on housing, national activity, manufacturing, durable goods orders, and PMI services.

In Australia, Reserve Bank governor Glenn Stevens and assistant governor financial system Malcolm Edey are due to speak tomorrow.

Elsewhere, the UK has reports on inflation and retail sales, while Europe publishes measures of business and consumer confidence, manufacturing and services. Japan also releases inflation data this week.

BusinessDesk.co.nz

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