NZ Dollar Outlook Kiwi may rise as greenback falls out of favour

Monday 9th December 2013

The New Zealand dollar may rise this week as sentiment turns against the US dollar even as data shows the world's largest economy is improving.

The local currency may trade between 80.80 US cents and 84.50 cents this week, according to a BusinessDesk survey of 11 traders and strategists. Nine expect the currency to advance while two say it may drop. The kiwi recently traded at 82.91 US cents from 82.82 cents at 8am in Wellington.

Traders have ditched the greenback even following better employment data at the end of last week. That suggests the kiwi is likely to remain in favour in the coming week as the Reserve Bank of New Zealand keeps its benchmark interest rate on hold and signals a rise is on the cards next year.

"Sentiment towards the US dollar is very negative," said Imre Speizer, senior market strategist at Westpac Banking Corp in Auckland. "Not even stonkingly good news is helping the US dollar. That being the case, the kiwi/US has got momentum behind it this week."

Reserve Bank governor Graeme Wheeler is expected to leave the official cash rate unchanged at 2.5 percent in his final review of the year on Thursday.

By March the OCR is expected to be at 2.75 percent, rising to 3 percent in the June quarter and to 3.5 percent by the end of 2014, according to a Reuters survey.

The kiwi is likely to dip briefly on Thursday as traders who expect the central bank to hike as early as January pull back their bets when no signals supporting that view are forthcoming, said Westpac's Speizer.

Markets are pricing in a 40 percent chance of a rate hike in January, he said. Still Speizer views an early hike as unlikely given a higher currency is keeping a lid on inflation and as the central bank awaits further evidence of the impact of its Oct. 1 mortgage lending restrictions on the housing market.

State valuer Quotable Value said today average house prices rose 9.2 percent in November from the year earlier although there are signs that lending restrictions may have led to fewer potential buyers at open homes, longer marketing periods and fewer properties selling at auction. Later this week industry body the Real Estate Institute of New Zealand will update its house price index for November.

Other data scheduled for release in New Zealand this week includes November electronic card transactions tomorrow and food prices on Thursday.

On Friday, traders will be eyeing the BNZ-BusinessNZ Performance of Manufacturing Index for November and the ANZ-Roy Morgan consumer confidence survey for December for signs of how the economy is tracking.

In Australia, key reports this week are the NAB business confidence survey for November on Tuesday, the Westpac consumer confidence survey for December on Wednesday and November's employment data on Thursday.

BusinessDesk.co.nz

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