NZ Dollar Outlook: Kiwi may remain flat this week as it seeks new impetus

Monday 11th April 2016

The New Zealand dollar is likely to stay relatively unchanged this week as traders mull the likelihood of lower interest rates which will still remain higher than other comparable countries.

The kiwi may trade between 66 US cents and 70.15 cents this week, according to 12 currency analysts in a BusinessDesk survey. Seven expect it to remain steady, while three say it may drop, and two bet it will gain. It recently traded at 68.13 US cents.

The local currency has failed at several attempts to sustain a break above 69 US cents because of concerns weak prices for dairy products, the country's largest export commodity, may weigh on the overall economy and prompt the Reserve Bank to cut interest rates further. Still, even though the Reserve Bank has cut the official cash rate to a record low 2.25 percent this year and is expected to continue its cuts, the country's interest rates remain higher than many other developed countries, underpinning demand for the currency.

"The NZ/US is really deciding whether it wants to break above its recent range but it hasn't got enough impetus or information or a big enough shock to make that leap," said Peter Cavanaugh, client advisor at Bancorp Treasury Services. "It's consolidating and waiting for fresh developments to justify the next move."

Bancorp's Cavanaugh said there was no data scheduled this week that was likely to provide an impetus to the kiwi, although the currency was vulnerable to a shock.

Should the currency break higher, it could hit 72 US cents, while a decline could see it fall to 64 cents, he said.

March data scheduled for release this week includes electronic card spending, food prices, housing sales, and manufacturing activity.

Australia publishes updates on housing finance, business confidence, consumer sentiment, and employment, while the Reserve Bank of Australia releases its six-monthly financial stability review. The US has retail sales, inflation and consumer sentiment releases.

Traders will be eyeing economic data out of China this week to track the performance of Asia's largest economy, and New Zealand's biggest trading partner. China is due to publish March data on inflation and producer prices today, trade on Wednesday, and industrial production, retail sales, and fixed asset investment on Friday. First quarter gross domestic product is also due Friday.

Elsewhere, the Bank of Canada and the Bank of England are both expected to keep interest rates on hold when they review policy on Wednesday and Thursday respectively.

The International Monetary Fund and the World Bank will detail through the week their take on the global economy, ahead of their annual Spring meetings starting on Friday. Last week IMF managing director Christine Lagarde warned that the global economic growth momentum was weak, while risks were probably on the rise, and confidence sorely lacking.

BusinessDesk.co.nz

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