Sharechat Logo

NZ Dollar Outlook: Kiwi decline expected as conditions turn sour

Monday 29th February 2016

Text too small?

The New Zealand dollar is expected to fall this week as weaker local conditions start to sour the economic outlook.

The kiwi may trade between 64.50 US cents and 67.80 cents this week, according to nine currency advisers surveyed by BusinessDesk. Six expect a decline, two are picking it to be neutral with a slight negative bias and one bets it will be flat. None is expecting a gain. It recently traded at 65.88 US cents.

The local currency shed about half a cent this morning after the ANZ Business Outlook survey showed business confidence and inflation expectations declined in February, while the ANZ Bank itself changed its view on interest rates, pricing in two cuts this year after previously expecting no change. The change in view by the ANZ, the country's largest bank, brings it into line with others in the market who expect the benchmark to fall to a record low 2 percent this year.

"ANZ's rate cut call change is pretty significant," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank in New Zealand. "They are the biggest bank in New Zealand and they've been clearly on the sidelines and clearly wrong, so the fact they've gone to rate cuts is interesting. It may make a few more people wake up and smell the roses.

"They have a significant corporate and business and rural lending portfolio so the fact that they have changed their rate call to me is quite interesting because clearly they were at complete polar opposites to the rest of us and it's backed up by their business confidence data."

Kelleher says the downturn in rural New Zealand seems to be building more momentum after a January hiatus.

Still, ASB doesn't see Reserve Bank governor Graeme Wheeler cutting interest rates at the upcoming March 10 monetary policy statement.

"I think he's quite happy to stay on the sidelines and leave some ammo in the tank if needed," Kelleher said.

ASB expects the RBNZ to cut in June and again in August.

This week, New Zealand data releases include January household credit growth today, fourth-quarter terms of trade on Tuesday, the Quotable Value house price index on Wednesday, and fourth-quarter building work put in place and the ANZ commodity price index on Thursday.

The fortnightly GlobalDairyTrade auction will be held overnight on Tuesday and futures market prices suggest a gain for the first time this year. 

Monthly vehicle sales data may also be published this week.

In Australia, the Reserve Bank is expected to keep interest rates on hold at its meeting tomorrow. Australia also has fourth-quarter gross domestic product data on Wednesday, trade data on Thursday and retail sales statistics on Friday.

In the US this week, investors will be eyeing US non-farm payrolls data on Friday as they gauge the strength of the US economy and the outlook for interest rate hikes. 

The US, Europe, China and Australia have manufacturing gauges scheduled for release this week while Europe also has measures of inflation and unemployment due out.

BusinessDesk.co.nz



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

SML - Synlait Milk Limited - Trading Halt of Securities
AIA - Auckland Airport announces board chair changes
AIA - Auckland Airport announces board chair changes
CEN - Tauhara commissioning progress update
FPH initiates voluntary limited recall
March 28th Morning Report
KFL Celebrates 20 Years of Excellence in Investment Mgmt.
SVR - Savor FY24 Earnings Guidance & Change in Banking Partner
NZK - NZ King Salmon Investments Limited FY24 Results
March 27th Morning Report