NZ Dollar Outlook: Kiwi may continue in recent range

Monday 27th August 2012

The New Zealand dollar may continue to trade in its range of the past month look forward to the central bankers' retreat in Jackson Hole, Wyoming, and for any signs of commitment from European leaders on the region's bond buying plans.

The New Zealand recently traded at 81.13 US cents, little changed from 81.09 cents at 8am. That's right in the middle of this week's forecast trading forecast of 80 cents to 82 cents, according to a BusinessDesk survey of five analysts. The local currency has held in the range since July 26.

Two analysts predict the kiwi will finish the week higher, two lower and one unchanged.

Federal Reserve chairman Ben Bernanke headlines the Jackson Hole retreat starting on Friday amid widespread speculation he will give details of plans for further monetary easing. Minutes from the latest Federal Open Market Committee meeting showed many members would support further stimulus.

The retreat comes at the end of a heavy week for US economic figures, with forecasts indicating improved performance for home prices, pending sales, consumer spending and revised economic growth.

"The market is 100 percent focused on the end of the week with Jackson Hole," said Stuart Ive, currency strategist at HiFX. "That has massive implications for the kiwi - by the end of the week the New Zealand dollar will be edging higher as expectations of Q3 get priced in."

The Fed's next policy meeting is scheduled for Sept. 12.

The New Zealand dollar was little changed on 64.77 euro cents from 64.80 cents at 8am after German Chancellor Angela Merkel told officials her coalition is calling for a Greek exit from the euro. Greek president Antonis Samaras last week asked Germany and France, the biggest economies in Europe, for more time to meet the terms of financial aid.

Euro-zone leaders are waiting for Germany's Constitutional Court to approve rules on the European Central Bank's plan to buy bonds off indebted euro nations, scheduled for Sept. 12.

"The only way to fix it is it to make an unlimited fund and Germany doesn't agree with that so they keep going round in circles," said Derek Rankin, director at Rankin Treasury Advisory Limited. "The euro is pointing upwards on expectations and promises."

Germany's IFO survey will be released on Monday and is expected to show Europe's largest economy will stall in the third quarter. German retail, unemployment and inflation readings will also be released this week.

Australia, New Zealand's largest export market, will release its home sales and construction figures on Tuesday, followed by building approvals on Thursday. The New Zealand dollar rose to 77.84 Australian cents from 77.77 cents at 8am.

It's another full week of earnings in New Zealand, with results from Mighty River Power, Air New Zealand, Auckland Airport and Port of Tauranga set for release. The New Zealand Institute of Economic Research's quarterly forecast is due out on Wednesday, followed by the National Bank of New Zealand's business outlook survey for August on Thursday. In July, net confidence was up two points to 15 points, while own-activity expectations rose four points to 24.

"We don't anticipate any major deviations in August's survey," said Mike Jones, market strategist at Bank of New Zealand. "For the market, a sharp fall (in confidence) would likely prompt the most reaction as local interest rate markets again move to price in RBNZ cuts."

Building consents for July will be released by Statistics New Zealand on Thursday.

BusinessDesk.co.nz

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