Sharechat Logo

NZ dollar falls as business funk deepens

Thursday 29th August 2019

Text too small?

The New Zealand dollar fell after the latest business survey showed pessimism plumbing new depths and inflation expectations continuing to fall.

The kiwi was trading at 63.05 US cents at 5pm in Wellington - the day’s low and the lowest since September 2015 - from 63.37 cents at 8am. The trade-weighted index was at 70.53 from 70.83.

The latest ANZ Bank business outlook survey found a net 52.3 percent of respondents expect deteriorating business conditions in the coming year, up from 44.3 percent a month ago.

Even worse, a net 0.5 percent now expect their own businesses will fare badly - the lowest reading in more than a decade. That’s down from a net 5 percent who in July had expected their businesses to improve.

“It’s a shocker of a result, no question about that. Most of the components and detail of the report were dismal,” says Imre Speizer, currency stategist at Westpac.

The own activity indicator, “is a reasonable contemporaneous indicator of GDP activity so that bodes ill for the next couple of data points,” Speizer says.

The survey also showed inflation expectations fell from 1.81 percent to 1.70 percent, the lowest since late 2016. The Reserve Bank is tasked with keeping inflation around the mid-point of 1-3 percent, so the survey shows business thinks the central bank will fall short of its target.

About a third of the responses from the 395 respondents came in after the Reserve Bank surprised everybody on Aug. 7 and slashed its official cash rate by 50 basis points to a record low 1 percent.  

Speizer says the RBNZ will be disappointed by the survey.

“There was a lot of debate whether that 50-point cut would be a booster or a depressor. You can actually argue it both ways,” he says.

Rather than stimulating people and businesses to invest because of lower interest rates, it could have instead alarmed people and got them wondering what bad news RBNZ had been looking at to prompt such an unusually large cut. OCR moves are traditionally in 25-point increments except in times of crisis like the Christchurch earthquakes or the GFC.

The survey comes against the generally uncertain global backdrop created by the US-China trade war.

Speizer says Westpac thinks the New Zealand dollar will go lower still.

The New Zealand dollar was trading at 93.74 Australian cents from 94.03, at 51.66 British pence from 51.89, at 56.88 euro cents from 57.19, at 66.79 yen from 67.26 and at 4.5183 Chinese yuan from 4.5376.

The New Zealand two-year swap rate edged down to a bid price of 0.8725 percent from yesterday’s close at 0.9281. The 10-year swap rate fell to 1.1475 percent from 1.2050.

(BusinessDesk)



  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:

NZ dollar stalls after Bascand's rate cut comments
Bascand says RBNZ will consider changing bank capital proposals
Affordable electricity key to decarbonisation - Genesis
Graeme Hart trims global packaging empire with US$615m asset sale
Stronger-than-expected inflation won't deter November rate cut - economists
Contact in talks on 13MW dairy boiler project
Restaurant Brands forecasts 10% growth in FY2020
Domestic inflation rises at fastest annual pace in eight years
16th October 2019 Morning Report
NZ dollar falls against British pound on Brexit hopes, CPI in focus

IRG See IRG research reports