NZ Dollar Outlook: Kiwi may decline on weaker local data, more bullish Fed
By Tina Morrison
Sept. 15 (BusinessDesk) - The New Zealand dollar may decline this week, weighed down by weaker local data and a more
positive view of the greenback.
The kiwi will probably trade between 79.60 US cents and 83.40 cents this week, according to a BusinessDesk survey of 10
currency traders and strategists. Five pick the local currency to decline, three say it will probably remain relatively
unchanged and two expect a gain. The kiwi was recently at 81.43 US cents.
New Zealand releases a slew of economic data ahead of this weekend's general election. Reports will probably show
economic growth slowed in the second quarter while the current account improved and dairy prices remained weak in the
latest GlobalDairyTrade auction. All eyes will be on the Federal Reserve early Thursday morning amid speculation its
policy-making committee may be more upbeat about the outlook for the world's largest economy and the potential for
higher interest rates.
"We’ve been US dollar bulls for a long time, and we're hoping to see that view vindicated on Thursday morning," said
Bank of New Zealand currency strategist Raiko Shareef. "We also have New Zealand second quarter GDP (gross domestic
product) which is expected to considerably slow from the first quarter, and then the dairy auction to boot. If
everything goes the right way, I can very easily see us below 80 US cents."
The US dollar index, which measures the greenback against a basket of currencies, posted its ninth consecutive week of
gains leading into the Federal Reserve meeting this week. That is the most weeks the index has gained consecutively
since 1997 as some investors bet that improving US economic data may prompt the Fed to bring forward interest rate rises
next year.
Still, some said the US dollar's recent strength left it at risk of a correction as traders "buy the rumour and sell the
fact" should the Fed confirm it is edging towards a tightening bias, or on disappointment should the Fed fail to change
its current stance.
The decision will be announced early Thursday morning Wellington time.
In New Zealand this week, data on Wednesday should show the annual current account deficit narrowed to $5.79 billion, or
2.5 percent of GDP, in the year through June, from a deficit of $6.3 billion or 2.8 percent, in the year through March,
according to a Reuters poll.
Meanwhile, traders will be keenly watching the result of Fonterra Cooperative Group's latest fortnightly auction early
Wednesday morning in anticipation that weak prices will continue.
GDP on Thursday is expected to show second quarter growth eased to a 0.6 percent pace from a 1 percent rate in the first
quarter as a weaker primary sector weighed on agricultural-based manufacturing and exports.
New Zealand is scheduled to publish the latest figures on net migration for August on Friday, with the strong monthly
gains expected to continue. The latest ANZ/Roy Morgan consumer confidence survey for September is also due out Friday.
Some traders speculated the kiwi may strengthen heading into Saturday's general election on reduced political risk. The
ruling National party goes into the last week of campaigning with enough support to govern with just ACT's David Seymour
and Peter Dunne of United Future, according Radio New Zealand's 'poll of polls' published today. National's latest
four-poll rolling average was 47.1 percent.
Elsewhere this week, the Reserve Bank of Australia will tomorrow release the minutes of its last meeting which will be
eyed for an insight into its view on the economy, while the Bank of England will publish the minutes of its last meeting
on Wednesday.
(BusinessDesk)