NZ Dollar Outlook Kiwi may fall on Spanish, Greek bailouts

Monday 24th September 2012

The New Zealand dollar may fall this week amid speculation Spain will ask for a full bailout, while debt-stricken Greece is still to reach an agreement with its regional lenders to get its next tranche of funds.

The New Zealand dollar recently traded at 82.78 US cents little changed from 82.88 cents at 8pm in Wellington. That's at the lower end of this week's forecasted trading range of 81.80 US cents to 84.30 cents.

Four analysts surveyed predict the kiwi will finish the week lower, one refused to comment.

Investor fears about the pace of global growth have reemerged amid growing speculation Spain will seek a bailout package in the coming days. At the same time Greece, Spain's indebted neighbour, is yet to reach an agreement with international lenders to access about 12 billion euros of additional assistance of its 130 billion euro package.

"We continue to get conflicting messages about whether Spain is asking for aid," said Kymberly Martin, market strategist at Bank of New Zealand. "That will weigh on risk sentiment globally and in turn the New Zealand dollar."

In June, European leaders agreed to use the euro-zone's bailout fund to support Spain's bank sector, dropping the requirement that governments get preferred creditor status on the nation's banks. Banks are able to be recapitalised directly by bailout funds rather than going through governments.

Traders will be looking to Monday's German IFO confidence survey to boost sentiment after last week's soft European manufacturing data stoked concern the region's economy may be slowing.

In the US, the world's largest economy, consumer confidence and the house prices index will be released on Tuesday, that's followed by home sales on Wednesday and initial jobless claims and the final take on second-quarter gross domestic products on Thursday.

"With QE3 now announced you have to question the relevance of historical data," said Daniel Brdanovic, head of institutional sales and global markets at HSBC.

Earlier this month Federal Reserve chairman Ben Bernanke announced the central bank would expand its holdings of long-term securities with open-ended purchases of US$40 billion of mortgage debt a month.

In New Zealand, the National Bank of New Zealand Business Outlook Survey for September will be released on Thursday. In last month's survey, a net 20 percent were optimistic as construction investment intentions bounced back.

"The key domestic data this week will be Thursday's NBNZ business confidence survey," BNZ's Martin said. "We wouldn't be surprised to see this slip a little from the average readings it did well to hold in August - it's not a tier one indicator but if it was a significant jump lower it would affect the currency."

Overseas merchandise trade for August will be released by Statistics New Zealand on Wednesday, followed by building consents for August on Friday.

BusinessDesk.co.nz

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