NZ Dollar Outlook: Kiwi to nudge higher this week, analysts predict

Monday 23rd January 2012

The New Zealand dollar’s direction this week is likely to be dominated by talks between Greece and private creditors about a debt swap plan needed to prevent the country from default and the Reserve Bank’s official cash rate review on Thursday.

The New Zealand dollar recently traded at 62.61 euro cents, up from 61.83 cents on Friday at 5pm. That is right in the middle of a largely unchanged forecast range of 61.2 euro cents to 63 cents, according to a BusinessDesk survey of four analysts.

The kiwi was trading at 80.62 US cents at 11 a.m., up from 80.48 cents at 8.30 a.m. and 80.13 cents on Friday.

The kiwi is likely to finish the week higher trading in a range of 79.4 US cents and 81.5 cents, analysts say.

The local unit rose as investors fled the euro after talks between Greek officials and private creditors stalled amid speculation progress was beginning to take shape over the weekend.

Talks broke down in Athens as Greek officials meet to consult with European Union. Greece must strike a deal with bondholders to finance a 14.5 billion euro bond payment on March 20 to stave off the risk of default, which could potentially trigger its exit from the euro.

There was hope a deal would be finalised before a key meeting today between euro zone finance ministers.

“There was some excitement that there might be an answer at the close of business on Friday but that didn’t happen – therefore the euro sagged a bit in the opening this morning,” said Imre Speizer, market strategist at Westpac Banking Corp.

”The daily trend for the kiwi is still higher,” Speizer said. “Barring a shock in the Greek negotiations, sentiment around Europe will nudge higher. They aren’t out of the woods but things have stabilised.”

This week’s fresh round of local data is expected to have relatively little impact on the kiwi. The analysts BusinessDesk spoke to predicted no changed in the Reserve Bank of New Zealand’s historically low 2.5 percent official cash rate at its review this Thursday.

“The kiwi will continue to chug upwards – the RBNZ shouldn’t disturb that,” Speizer said. “It shouldn’t be too much of a biggie.”

In Europe, finance ministers will meet today to discuss the latest draft of a fiscal pact aimed at stemming the region’s debt crisis by tightening the rules on budget deficits.

In the US, the earnings season has started positively with 33 out of the 51 companies in the S&P 500 so far beating projections, Bloomberg data shows.

Reports due out this week include Apple, Johnson & Johnson, MacDonald’s and Yahoo! Federal policymakers will meet for the first time this year on Tuesday, with the Federal Open Market Committee releasing its policy statement on Wednesday, including interest rate forecasts for the first time.

US data set for release includes pending home sales, an initial reading on fourth-quarter growth, and January consumer sentiment.In Australia, the Consumer Price Index will be released on Wednesday, with markets closed on Thursday for Australia Day.

In China, the markets are closed till Wednesday for spring holidays. There is no New Zealand data set for release today, with Wellington Anniversary Day keeping trading quiet.

Official data this week are: Reserve Bank credit card spending for December, set for release on Wednesday; the OCR review on Thursday, followed by the BNZ-Business NZ Performance of Manufacturing Index on Thursday afternoon; and December balance of trade statistics on Friday.

(BusinessDesk)

BusinessDesk.co.nz

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