Dollar pares loss ahead of business survey, OCR review

Wednesday 29th April 2009

The New Zealand dollar pared losses ahead of the release of a business survey today which may show signs the economy is beginning to recover and as investors prepare for the central bank’s review of interest rates tomorrow.

The kiwi dollar may be buoyed if the National Bank Business Outlook, a survey of 1,500 companies nationwide that measures business confidence, shows signs of a tentative improvement in the economy.

Economists predict Reserve Bank Governor Alan Bollard will slash the official cash rate 50 basis points to a record low 2.5% tomorrow, helping lift the economy out of its first recession in a decade.

Meanwhile, the greenback was dragged down as improving consumer confidence and better-than-expected housing data in the US lifted risk appetite.

“People are going to be watching the National Bank Business Survey for a gain in the economy or green shoots starting to show,” said Danica Hampton, currency strategist at Bank of New Zealand. “We won’t see the kiwi break (below) 55 US cents before the review” tomorrow, she said.

The kiwi rose to 55.88 US cents from 55.69 cents yesterday, and gained to 53.84 yen from 53.48 yen. It slipped to 78.91 Australian cents from 79.25 cents, and dropped to 42.49 euro cents from 42.76 cents.

Hampton said the currency may trade between 55.00 U.S. cents and 56.40 cents today, as it continues to be sold on rallies.

Trade figures out today may show the trade deficit fell to $331 million in March, compared to $489 million the previous year, according to a Reuters survey. Other data to keep an eye on is the Reserve Bank’s credit growth figures, indicating the growth of private sector loans.

The Federal Open Market Committee meets overnight, and while it is expected to retain its benchmark rate at a range between zero and 0.25%, commentators will be watching for any new statements on quantitative easing.

US first-quarter gross domestic product probably shrank 4.2% at an annualised rate when the data is released tomorrow.

The Bank of Japan meets tomorrow, and will probably keep its benchmark rate steady at 0.1%, while comments from European Central Bank board member Lorenzo Bini Smaghi dashed the prospect of quantitative easing when it meets next month.

Businesswire.co.nz

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