NZ Dollar Outlook: Kiwi set to take a breather on light data week

Monday 22nd September 2014

The New Zealand dollar is lacking strong drivers this week after volatile trading last week on the back of several major events.

The kiwi will probably trade between 80.50 US cents and 82.50 cents this week, according to a BusinessDesk survey of 10 currency traders and strategists. Three pick the local currency to decline, four expect a gain and three say it will probably remain relatively unchanged. The local currency ended last week little changed, belying its 80.73 US cent to 82.30 cent range. The kiwi was recently at 81.43 US cents.

The local currency appears to have few drivers for a strong direction this week as certainty returns to markets following a slew of big risk events last week, including the Federal Reserve meeting, the vote on Scottish independence from the UK and New Zealand's general election. With those events now behind it, the market may take a breather before speculators take up new positions at the start of the new quarter next week, analysts said.

"Last week was such a full-on week with a lot of events that would feed directly into risk sentiment and therefore to the New Zealand dollar," said Peter Cavanaugh, client advisor at Bancorp Treasury Services. "They have been resolved. It's not the merits of either outcome, it's the fact that the outcome has removed uncertainty. Markets hate uncertainty.

"There's very little on the horizon ahead of quarter-end next week so the market is really in a standing still phase assessing events," Cavanaugh said.

The dearth of data could leave the markets more vulnerable to some form of shock, he said.

The main local focus this week will be Fonterra Cooperative Group's annual earnings announcement on Wednesday where New Zealand's largest corporate may advise dairy farmers to expect lower prices for their milk this coming season in light of declining global dairy prices.

Falling dairy prices are also likely to hit New Zealand overseas merchandise trade data for August scheduled for publication on Wednesday. On the same day, the Reserve Bank publishes August data on the level of high-debt mortgages.

Elsewhere, China's HSBC flash manufacturing PMI tomorrow may show activity weakened a touch to 50.1 in August from 50.2 the previous month. A reading above 50 indicates expansion. China, Asia's largest economy, is closely watched as it is New Zealand's largest trading partner, and the biggest buyer of many New Zealand commodities.

In Australia this week, traders will be eyeing the Reserve Bank's financial stability report on Wednesday and speeches by governor Glenn Stephens and Tony Richards, the bank's head of payments policy department.

In the US, revised second quarter GDP data will be published on Friday.

BusinessDesk.co.nz

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