Dollar holds above 68 US cents ahead of National Bank survey

Monday 31st August 2009

The New Zealand dollar held above 68 US cents before the National Bank Business Outlook, which will show whether the previous month’s optimism has endured, and after Reserve Bank Governor Alan Bollard said the economy had fared “reasonably well” in the face of the global slump.

The National Bank’s survey of business sentiment for August, out today, comes after the series recorded its strongest result in seven years in July, with a net 19% of firms expecting general business conditions to improve.

Bollard wrote in the NZ Herald that New Zealand needs “a stronger, more resilient financial system” after the credit crisis “exposed some vulnerabilities” in the economy.

Still, New Zealand had fared “reasonably well” and the central bank hadn’t needed to use any “unorthodox measures,” he said.

Today’s “National Bank survey will be a crucial check on whether the better-than-expected improvements seen in July’s survey overstated the case for a sustainable recovery of the New Zealand economy,” said Danica Hampton, currency strategist at Bank of New Zealand.

Still, if businesses remain upbeat the kiwi probably won’t test 69 US cents as “people are starting to change their strategies” after it failed to break the level quite a few times, she said.

The kiwi slipped to 68.47 US cents from 68.55 cents last week, and was little changed at 63.51 on the trade-weighted index, or TWI, a measure of the currency versus a basket of five trading partners, from 63.54.

It dropped to 63.90 yen from 64.36 yen last week, and rose to 47.86 euro cents from 47.77 cents. It was little changed at 81.30 Australian cents from 81.31 cents last week.

Hampton said the currency may trade between 68.30 US cents and 68.80 cents today as a drop-off in US consumer confidence drags on investors’ appetite for higher-yielding, or riskier, assets.

Stocks on Wall Street fell on Friday after the Reuters/University of Michigan Survey of Consumers said its confidence index fell to 65.7 this month, its lowest level since April.

Businesswire.co.nz

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