NZ Dollar Outlook: Kiwi may remain rangebound this week amid conflicting forces

Monday 9th February 2015

The New Zealand dollar may be range bound this week as a lack of local data sees its value determined by its higher relative yield in the face of a strengthening US dollar.

The kiwi may trade between 71 US cents and 75 cents this week, according to a BusinessDesk survey of 10 currency traders, strategists and advisors. Four say the local currency will fall, three expect it to gain and three pick it to remain broadly unchanged. It recently traded at 73.52 US cents.

The New Zealand dollar began the week with a softer tone after US jobs data at the end of last week printed better than expected, bolstering expectations the Federal Reserve will increase interest rates around the middle of the year and increasing the allure of the greenback. Still, New Zealand's relatively high interest rates continue to underpin demand for the local currency in a weak global environment where some 16 central banks across the globe have eased monetary settings so far this year.

"The kiwi is now caught in a bit of a range," said Stuart Ive, OMF senior dealer, foreign exchange. "The strong US payrolls number has put the pressure on the downside for the kiwi but at the end of the day, the kiwi still gives a yield. We have seen various countries around the globe cut their rates and that's why kiwi remains a standout."

In New Zealand this week, traders will be eyeing the Real Estate Institute's latest housing data for January with interest after Reserve Bank governor Graeme Wheeler commented in a speech last week that he is concerned about accelerating house prices in Auckland. The REINZ report is due out Wednesday or Thursday.

Other January data due this week includes electronic card spending on Wednesday, the performance of manufacturing index on Thursday and food prices on Friday.

The New Zealand corporate earnings season also starts this week, with an estimated 49 companies scheduled to post their earnings over the course of the season, most of which are for the first half of their financial year.

In Australia, the focus will be on Reserve Bank governor Glenn Stevens' testimony to a parliamentary economics committee on Friday for any clues on the future direction of interest rates after he cut the benchmark to a record low 2.25 percent last week.

Australia also has a business confidence report and house price data tomorrow, consumer sentiment and home loan data on Wednesday and labour market data on Thursday.

Elsewhere this week, the Bank of England publishes its quarterly inflation report, the US has retail sales data and consumer confidence, while the Eurozone has fourth quarter GDP.

Traders will also be keeping an eye on talks between Greece and other countries of the Eurozone over Greece's debt obligations.

BusinessDesk.co.nz

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