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RESEND NZ Dollar Outlook Kiwi may end the week unchanged as US tapering expectations dominate

Monday 12th August 2013

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The New Zealand dollar may end the week little changed should US economic indicators point to a revival in the world's largest economy, bolstering expectations of a pullback in monetary stimulus.

The local currency may trade between 78.50 US cents and 82.50 cents this week, according to a BusinessDesk survey of nine traders and strategists. Five expect the kiwi to remain unchanged while four expect it to gain. The kiwi recently traded at 80.30 US cents, from 80.34 cents at 8am in Wellington.

Traders will be eyeing a slew of reports in the US this week for signs of a pickup in the world's largest economy. The Federal Reserve has said it is watching for improvement in economic data to start tapering its US$85 billion a month bond buying programme which is stimulating the US economy and debasing the greenback.

This week "will still remain an issue of reshaping tapering expectations," said Stan Shamu, a market strategist at IG Markets. "September is coming in very quickly and the market was looking for tapering starting in September. We will continue to look at some of the US releases very closely this week."

Reports scheduled for release in the US this week include retail sales, producer prices, inflation, industrial production, manufacturing, consumer sentiment, homebuilding and regional activity.

"If this data comes in in line or slightly better than expected, then we might see the US dollar come off its lower base," said IG Markets' Shamu. "That might lead to a slight tapering in the commodity or risk currencies. We expect the move higher in risk earlier on in the week to be countered by a recovery in the US dollar later in the week and this will lead to a fairly neutral effect."

In New Zealand this week, traders will be monitoring reports on retail sales, manufacturing and consumer confidence for insights into second quarter growth.

In Australia, reports are scheduled on business confidence, consumer sentiment and wages while the Treasury will also update budget expectations ahead of next month's general election.

The New Zealand dollar may trade between 86 Australian cents and 88.80 cents this week, according to a BusinessDesk survey of nine traders and strategists. Three expect the kiwi to remain unchanged while three expect it to gain and three say it will probably end the week lower. The kiwi recently traded at 87.33 Australian cents, from 87.20 cents at 8am in Wellington.

"On the Aussie dollar front, we have seen a long period of underperformance and now it has started to recover this week," said IG Markets' Shamu. "If the Aussie manages to continue to recover some ground in the short term, then this might see it a tad higher for the week."

Later in the week, focus will turn to the Bank of England minutes from its August meeting.

BusinessDesk.co.nz

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