NZ Dollar Outlook: Kiwi to trade near top of recent range as Greece nears finish line

Monday 13th February 2012

The New Zealand dollar may hold near the top of its recent range after Greek Prime Minister Lucas Papademos won approval from the parliament for austerity measures needed to secure an international bailout.

The New Zealand dollar recently traded at 83.01 US cents just before 1pm, up from 82.73 US cents at 8.30 am this morning. That is at the top end of this week’s forecast range of 81 US cents to 84 cents, according to a BusinessDesk survey of five analysts. The kiwi dollar nudged above 84 cents last week, a five-month high.

Greek politicians cleared their first hurdle, voting to secure a $130 billion-euro rescue package needed to prevent the nation defaulting from the euro. Violence broke out in Athens as demonstrators rallied against the bill that proposes $3.3 billion euros in wage, pension and job cuts. European Union finance ministers will meet on Wednesday to sign off on the deal for Greece to obtain the next tranche of bailout cash.

“We have to be extremely wary on any resolution because the (Greek) population is not particularly happy,” said Alex Sinton, senior dealer at ANZ New Zealand. “I’d be surprised if the kiwi pushed above 84 cents.”

In New Zealand, the Treasury releases its budget policy statement on Thursday, including revised economic forecasts and full economic and fiscal update ahead of this year’s budget.

“New Zealand is doing okay relative to the rest of the world – but it’s all relative,” said Peter Cavanaugh, senior client adviser at Bancorp. “Fundamentally we tick all the correct boxes.

“The danger is if we get a strong currency with our current mix of exports – therefore this should be sending a warning to policy makers,” he said.

The Food Price Index is released on Tuesday, followed by the retail trade survey for the fourth quarter is set for release on Wednesday, with the market predicting a 0.8 percent increase. On Thursday, the Bank of New Zealand PMI, ANZ Job Advertisements survey and ANZ Roy Morgan consumer confidence is set for release.

It is a data heavy week in the US, with retail sales on Tuesday and industrial production on Wednesday, followed by housing and the producer price index on Thursday, giving investors an update on the pace of the world’s biggest economy.

Federal Reserve chairman Ben Bernanke will also speak to the Federal Deposit Insurance Corporation, “Future of Community Banking Conference” in Virginia, on Thursday. The consumer price index is set for released on Friday.

Investors will be scrutinising the latest European data starting on Wednesday, with the first estimate of fourth-quarter economic performance in the euro zone expected to show a contraction on 0.4 percent after an increase of 0.2 percent in the previous quarter.

Germany’s ZEW survey of economic sentiment index for February is also set for release, with analysts predicting an increase.

The latest numbers on Japan’s economy are due out today, with the Bank of Japan reviewing inflation targets. The bank has avoided setting an explicit inflation target, its current view for price stability situated around the cost of goods rises between more than zero and as much as 2 percent, it is centered at about 1 percent.

(BusinessDesk)

BusinessDesk.co.nz

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