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NZ Dollar Outlook: Kiwi may decline in volatile trading as Yellen testimony, Fonterra payout loom

Monday 23rd February 2015

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The New Zealand dollar may decline in volatile trading this week as investors wade through data releases, updated forecasts and key speeches to assess the economic outlook.

The kiwi may trade between 73.20 US cents and 77 cents this week, according to a BusinessDesk survey of 13 currency strategists and advisers. Eight expect the currency to decline, while four predict it will gain and one bets it will remain relatively unchanged. The kiwi recently traded at 75.13 US cents.

The global focus this week is on Federal Reserve chair Janet Yellen's testimony to US lawmakers, as investors seek to narrow further the window when the world’s biggest central bank will start to lift interest rates. In New Zealand, all eyes will be on an update to Fonterra Cooperative Group's forecast payout to dairy farmers following its Wednesday board meeting.

"This week, the key events for the New Zealand dollar will be Fed chair Yellen's testimony to lawmakers, and Fonterra's rumoured update to its milk payout forecast," Bank of New Zealand currency strategist Raiko Shareef said in a note.

Yellen’s comments on monetary policy and the state of the US economy follow the release of the Fed's January meeting minutes which showed that the majority of policymakers are in no rush to increase rates. She is set to testify on Feb. 24 and again the next day. Still most investors continue to position for higher US rates at some point this year.

Meanwhile, Fonterra's board is scheduled to meet on Wednesday, with an announcement on its forecast payout possible Thursday morning.

Some agricultural economists expect Fonterra to raise its forecast after prices for whole milk powder, the nation's key export product, lifted by more than a third over the past two GlobalDairyTrade auctions.

Auckland based Fonterra's current forecast for the 2014/15 season is $4.70 per kilogram of milksolids, from a record $8.40/kgMS last season. ASB Bank and Westpac Banking Corp expect Fonterra to raise its forecast to $5/kgMS, while BNZ expects $4.80/kgMS and ANZ Bank New Zealand says Fonterra could raise it to $4.90.  Most expect next season's price will be in the mid $6/kgMS level.

New Zealand also has January trade and migration data scheduled for release on Thursday and building consent data on Friday.

The Reserve Bank of New Zealand publishes its survey of inflation expectations tomorrow, details on high loan to value ratio lending and its foreign currency transactions on Thursday.

ANZ publishes its monthly business confidence survey on Friday.

Finance Minister Bill English is speaking on Thursday on the government's economic approach for its third term, at an event hosted by the Auckland Chamber of Commerce and Massey University, in Auckland.

Elsewhere, traders will eyeing continuing talks on Greek debt and Chinese manufacturing data.

European Central Bank president Mario Draghi is scheduled to speak tomorrow in Frankfurt.


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