NZ Dollar Outlook: Analysts split on direction ahead of GDT auction

Monday 19th October 2015

Analysts are split on the direction of the New Zealand dollar this week as they assess whether the local currency's gains have gone too far.

The kiwi may trade between 66 US cents and 70.60 cents this week, according to a BusinessDesk survey of 11 currency analysts. Five expect the kiwi to decline, four say it may rise and two see it remaining largely unchanged. It recently traded at 68 US cents.

The local currency last week rose to its highest level in four months on a trade-weighted basis as analysts pulled back expectations for interest rate hikes in the US and factor in better prospects for the local economy following a gain in prices of dairy products, the country's largest commodity export. The kiwi may consolidate this week as the futures market suggests prices will stabilise at the GlobalDairyTrade auction tomorrow night, analysts said.

"Let's wait and see what the dairy auction does, but it looks like we are finally seeing a tapering in the charge up of that value," said Tim Kelleher, ASB Bank head of institutional sales in New Zealand. "The dairy trade is potentially negative for Tuesday night."

ASB's Kelleher said he recommends selling the kiwi on any rallies.

"The market has come a long way in the past week so I think we will just consolidate, go sideways," he said.

Today, the focus is on the release of Chinese economic data, including third-quarter gross domestic product which is expected to slow to an annual pace of 6.8 percent from 7 percent in the second quarter, its smallest expansion since the financial crisis in 2009.

In New Zealand, September migration and tourism data due Wednesday is likely to show continued strength, reflected in credit card billings due for release the same day.

In Australia, the Reserve Bank tomorrow publishes the minutes to its last meeting, when it kept interest rates on hold. The RBA's Malcolm Edey, assistant governor (financial system), is scheduled to speak at the International Swaps and Derivatives Association's 2015 Annual Australia conference in Sydney on Thursday.

In the US, Federal Reserve chair Janet Yellen is scheduled to make brief welcoming remarks at a ceremony in Washington on Tuesday, and speeches from other Fed officials during the week will also be watched for fresh clues on the potential timing of a rate lift. Housing and manufacturing data are also scheduled for release in the US this week.

Meanwhile in Europe, the European Central Bank announces its latest policy decision on Thursday.

BusinessDesk.co.nz

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