NZ Dollar Outlook: Kiwi may decline this week amid Greek uncertainty

Monday 29th June 2015

The New Zealand dollar may decline this week, sinking as low as 66 US cents, as investors shed riskier assets in favour of safe havens amid uncertainty about Greece's ability to repay debts.

The kiwi may trade between 66 US cents and 70.50 cents this week, according to a BusinessDesk survey of 13 currency advisers. Eight expect the currency to decline, while three pick a gain and two say it will remain largely unchanged. It recently traded at 68.33 US cents.

All eyes are on Greece this week after the country failed to reach agreement with its creditors at the weekend, increasing fears it won't be able to make a 1.55 billion euro payment to the International Monetary Fund due tomorrow. A last minute request for an extension to allow a Greek referendum on bailout terms was rejected. Investors, concerned about a possible Greek default, are retreating to safe haven investments and out of the kiwi.

"Risk aversion is kicking in," said Stuart Ive, senior dealer, foreign exchange, at OMF. "There are so many twists and turns in this thing I find it highly unlikely now that there will be a resolution." The main focus for the week will be Greece, he said.

For the kiwi, already under pressure from lower interest rates, slowing growth and weak dairy prices, risk aversion is giving it an additional push lower, Ive said.

Locally this week, the Reserve Bank will publish its foreign exchange transaction data for May this afternoon. The ANZ's latest business confidence survey is released tomorrow, as are building consent figures for May. On Thursday the outcome of the latest GlobalDairyTrade auction will be released, and ANZ will also publish its monthly commodity price index.

June housing market data from state owned Quotable Value and Auckland real estate agency Barfoot & Thompson is due towards the end of the week, and a report on vehicle sales for the month may also be published.

In the US this week, the focus will be on employment data on Thursday, with traders expecting continued growth in nonfarm payrolls will underpin the case for future interest rate hikes. On Friday US financial markets are closed for the July 4 Independence Day holiday.

The US also has data on housing, manufacturing, consumer confidence and motor vehicle sales data due this week.

In Australia, reports are due on housing, trade and retail sales. Reserve Bank of Australia governor Glenn Stevens is scheduled to speak at the Official Monetary and Financial Institutions Forum in London tomorrow.

Elsewhere, Europe has reports on unemployment, inflation and manufacturing, while the UK will release updates on consumer confidence, manufacturing and housing, as well as the final reading of first-quarter GDP.

BusinessDesk.co.nz

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