NZ dollar heads for 1.8% weekly gain as Chinese stimulus talk adds to upbeat local outlook
By Paul McBeth
March 28 (BusinessDesk) - The New Zealand dollar is heading for a 1.8 percent weekly gain against the greenback and near
new post-float highs on a trade-weighted basis amid speculation China’s government will take action to shore up a
sluggish economy, adding to an upbeat outlook for local growth.
The kiwi rose to 86.85 US cents at 5pm in Wellington from 85.32 cents at the New York close last Friday. It reached a
two-and-a-half year high 86.96 US cents, and was up from 86.72 cents at 8am and 86.25 cents yesterday. The
trade-weighted index reached a new post-float high 81.03, trading at 80.94 at 5pm from 80.43 yesterday. The TWI is
heading for a 1.2 percent weekly gain from 80 at the New York close last Friday.
A BusinessDesk survey of nine traders and strategists predicted the local currency would trade between 84 US cents and
87 cents this week, from 85.40 cents at 8am on Monday. Three expected the currency to remain relatively unchanged, four
expected it to gain and two said it could fall.
The Australasian currencies got a boost today after Chinese Premier Li Keqiang was reported as saying he was confident
growth will be in a reasonable range, and that his nation can’t ignore risks facing the economy, fuelling expectations
the government will act to spur the economic expansion. China is New Zealand and Australia’s largest trading partner.
The prospect of Chinese stimulus added to an already favourable view of the New Zealand economy, which got another boost
yesterday when the February trade balance beat expectations, and after Reserve Bank deputy governor Grant Spencer
signalled the monetary authority will continue to hike interest rates even with an elevated exchange rate.
“We all know we’ve got a strong enough outlook, and then we had yesterday’s trade balance beating expectations,” said
Sam Tuck, senior FX strategist at ANZ Bank New Zealand. “Everybody’s expecting there to be strength, but beating
consensus forecasts has given offshore people a good reason to buy the kiwi.”
Large financial institutions will reset their asset allocations on Monday for the end of the quarter, though ANZ’s Tuck
doesn’t expect that to be a big influence on the kiwi.
Next week traders will be watching monetary policy reviews in Australia, Europe and the UK, as well as US employment
figures and a speech from Federal Reserve chair Janet Yellen.
ANZ’s Tuck said US economic data will be keenly watched as investors prepare for the world’s biggest economy to gather
some momentum, which should spur the greenback to gain.
“On all measures we’re looking at, the kiwi is over-valued,” Tuck said. “The question is timing, and finding the
catalyst to bring it back.”
The local currency gained to 93.57 Australian cents at 5pm in Wellington from 93.37 cents yesterday, and rose to 88.70
yen from 87.99 yen. It advanced to 52.25 British pence from 52 pence yesterday, and increased to 63.17 euro cents from
62.57 cents.
(BusinessDesk)