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NZ Dollar Outlook Kiwi may decline as investors seek improving returns in the US

Monday 24th June 2013

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The New Zealand dollar may decline this week as the yield appeal of the kiwi diminishes amid expectations of better times ahead for the US economy.

The local currency may trade between 75 US cents and 80 cents this week, with a downside bias, according to a BusinessDesk survey of nine traders and strategists. The kiwi recently traded at 77.64 US cents from 77.52 cents at the New York close Friday, when it dipped below 77 cents for the first time in a year.

Federal Reserve chairman Ben Bernanke last week said the US central bank may wind back its US$85 billion a month of bond buying this year and end the stimulus programme in 2014 as the risks to the US economy have decreased. The prospect of improved growth and a higher interest rate track in the world's largest economy has boosted the greenback and diminished the yield appeal of the kiwi.

"The kiwi/US continues to have more downside risk as the liquidation in high-yielding carry trade currencies continues," said Dan Bell, a currency strategist at HiFX.

A smattering of reports in New Zealand this week will provide some colour on how the economy is tracking.

This afternoon, the Reserve Bank will release credit card billing data for May which will likely be consistent with higher spending. The latest Westpac McDermott-Miller Consumer Confidence survey published last week showed New Zealand consumer confidence surged to its highest level in three years in June, as people moved out of saving mode and into spending mode.

On Thursday, trade data may show exports were dented as the drought impacted dairy production.

The latest ANZ business confidence survey published the same day may show that recent weakness in the kiwi has boosted optimism.

Meanwhile, Friday's building consent figures for May could soften after an 18.5 percent jump in April. Later on Friday, Reserve Bank data on lending to households secured on residential mortgages in May will likely show continued growth.

In the US on Monday, traders will be eyeing the Chicago Fed national activity index and the Dallas Fed manufacturing survey for indications of how the economy is tracking.

A speech by the hawkish Dallas Fed President Richard Fisher in London will be watched for further comments on an end to quantitative easing.

Further data published in the US this week may have an upbeat tone. Tomorrow sees the S&P/Case-Shiller index of home values for April and the Commerce Department figures for May home sales while Commerce Department data will probably show orders for durable goods grew in May after rising 3.5 percent in April.

The Commerce Department will probably say Wednesday that its estimate of growth in the first quarter is unchanged at 2.4 percent.

On Thursday, reports will probably show US household confidence held near multiyear highs while consumer spending climbed in May.

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