NZ Dollar Outlook Kiwi may fall this week on downside risks to global data

Monday 29th April 2013

The New Zealand dollar may fall this week on the risk that manufacturing figures from China and US payrolls will add to signs of global weakness and traders await decisions from the Federal Reserve and European Central Bank.

The kiwi dollar recently traded at 84.97 US cents, from 84.75 cents on Friday in New York. It reached as high as 85.62 cents on Friday. The currency may trade in a range of 83 US cents to 86 cents this week, and is more likely to test the bottom of that range, according to a BusinessDesk survey of five strategists and traders.

The Chinese and US data takes on greater significance because the latest readings have been lower than expected. The unofficial China HSBC Flash Purchasing Managers Index fell to 50.5 in April from 51.6 in March, missing estimates, figures last week showed. US payrolls in March tumbled to just 88,000 jobs added, less than half the number expected and adding to concern global growth is sputtering.

Weak numbers this week could weigh on growth currencies such as the kiwi and Australian dollars. At the same time the Federal Open Market Committee may note the run of weaker data, while the ECB may lop 25 basis points off its key rate to 0.5 percent on Thursday

"The overall tone in China has been weaker over the last few months," said Dan Bell, currency strategist at HiFX. "It has been a slower start to the year for the US economy. It does seem the kiwi has got more downside risk."

On the local calendar, the ANZ Business Outlook for April, out tomorrow, will show whether the agricultural sector dents business confidence as it weighs the cost of drought. Confidence fell from a 19-month high in March, with agriculture turning pessimistic, seeing falling profits and less employment.

"Drought might cause a little bit of pullback," said Imre Speizer, senior markets strategist at Westpac Banking Corp. "Confidence should still be high

Building consents for March are also due out tomorrow. Thursday morning brings the FOMC decision, the results of the latest GlobalDairyTrade auction and the ANZ Commodity Price Index. Dairy prices rose for the ninth straight auction two weeks ago, though the increase was the smallest this year.

US payrolls for April, due Friday in the US, are expected to show the world's biggest economy added about 150,000 jobs this month, while the jobless rate held at 7.6 percent.

While that's a bounce-back from March's weak reading, "150,000 a month isn't enough for the US jobs market to improve," said Peter Cavanaugh, senior client adviser at Bancorp Treasury Services. "If it was a school report it would be 'could do better'," he said.

"The kiwi dollar is approaching the week very nervously," he said.

BusinessDesk.co.nz

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