NZ Dollar Outlook Kiwi moves likely to be determined by overseas events this week

Monday 7th April 2014

The New Zealand dollar will probably take its direction from overseas sentiment this week, with little on the local agenda as investors anticipate a rise in interest rates later this month.

The local currency may trade between 84 US cents and 87 cents this week, according to a BusinessDesk survey of 11 traders and strategists. Six predict the kiwi will fall this week, while one expects it to gain and four see it largely unchanged. It recently traded at 86.10 US cents.

Investors are weighing competing tensions regarding the pace of the US economic recovery, the potential for softer New Zealand commodity prices, the impact of a higher local currency on exporters and expectations for continued hikes in the New Zealand official cash rate.

"Markets have taken a deep breath ahead of the OCR review in two weeks which is expected to deliver an interest rate rise," said Peter Cavanaugh, client advisor at Bancorp Treasury. "Globally it is more or less steady as she goes just waiting for the next round of central bank decisions or actions."

Cavanaugh said the kiwi will be vulnerable to any unexpected shocks this week with no major events scheduled.

Locally, the main scheduled release is tomorrow's Quarterly Survey of Business Opinion published by the New Zealand Institute of Economic Research. An optimistic reading could boost the kiwi higher, Cavanaugh said.

Today, state valuer Quotable Value is scheduled to publish its latest housing data for March, which will be eyed for signs Reserve Bank high-debt lending restrictions introduced in October are cooling the market. The Real Estate Institute may also publish its latest figures this week.

Other March data scheduled for release this week includes electronic card transactions on Wednesday, the BNZ-BusinessNZ Performance of Manufacturing Index on Thursday and food prices on Friday.

Treasury releases the latest crown accounts for the eight months through February tomorrow.

In Asia, central banks in Japan, Indonesia and South Korea are expected to keep monetary policy unchanged following meetings this week, according to Moody's Analytics. The Bank of England is also expected to keep rates unchanged when it meets on Thursday.

In the US, traders will be eyeing minutes from the latest Federal Open Market Committee meeting, published early Thursday morning New Zealand time, alongside speeches by several US policy makers.

Federal Reserve speakers this week include St Louis Fed President James Bullard, Minneapolis Fed President Narayana Kocherlakota, Philadelphia Fed President Charles Plosser, Chicago Fed President Charles Evans and Fed Governor Daniel Tarullo.

US reports scheduled for release this week include consumer credit, on Monday; the NFIB small business optimism index, on Tuesday; wholesale trade, on Wednesday; weekly jobless claims, as well as import and export prices, on Thursday; and the producer price index, and consumer sentiment, on Friday.

In Australia this week, all eyes will be on Thursday's employment data for February and tomorrow's NAB business confidence survey. Even though Australia's unemployment rate probably rose to 6.1 percent in March from February's 6 percent level, and employment growth may not beat February's gain, forward indicators suggest the labour market is close to troughing, according to Moody's Analytics.

In China this week, March data on monetary aggregates scheduled for release on Thursday will indicate how increased liquidity in the interbank market is playing out as banks restrain lending because of tight balance sheets and fears of defaults, Moody's Analytics says.

China is also scheduled to release March data for foreign trade on Thursday and for inflation and producer prices on Friday.

Meanwhile, the International Monetary Fund and World Bank will release updates to their outlooks ahead of the start of their spring meetings in Washington on Friday.

BusinessDesk.co.nz

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