NZ Dollar Outlook Kiwi may extend gains ahead of US payrolls data

The New Zealand dollar will probably continue its upward momentum this week on the back of a positive economic outlook.

The local currency may trade between 81.20 US cents and 84.50 cents this week, according to a BusinessDesk survey of 10 traders and strategists. Eight expect the currency to rise while one says it will be unchanged and one expects a decline. The kiwi recently traded at 82.69 US cents from 82.81 cents at 8am in Wellington.

Positive momentum in the New Zealand economy means the nation's central bank is tipped to be the first in the OECD to raise interest rates this year, increasing the lure of the local currency. While other countries grapple with how to wind back their unprecedented money-printing programmes, New Zealand is expected to increase rates as early as this month.

"Coming into the New Year, risk appetite is pretty solid which is always a good thing for the kiwi," said Kymberly Martin, market strategist at Bank of New Zealand. "On the domestic front, we have come in to the New Year and things are still look pretty positive and there is not going to be anything within the coming week that is going to change that view."

The kiwi is likely to drift higher leading into the key US non-farm payrolls report on Friday, Martin said.

Reuters polling suggests US employers added 193,000 workers to payrolls last month, while Bloomberg surveys point to an additional 195,000.

A significantly higher number could boost confidence in the US economic expansion and increase expectations for the Federal Reserve's plan to pull back on its monetary stimulus programme, said the BNZ's Martin.

The Fed is planning to reduce its US$85 billion a month bond-buying programme by $10 billion starting this month. A reduction in the programme supports the greenback because it reduces the amount of US dollars in circulation, boosting its value.

The Fed will release the minutes of its Dec. 17-18 meeting on Wednesday. However markets are paying more attention to data releases than commentary given there is so much rhetoric from Fed speakers which is often contradictory, Martin said.

The US Senate is expected to confirm today that Janet Yellen will succeed Fed chairman Ben Bernanke.

No change in rates is expected following central bank meetings in Europe and England on Thursday although traders will be eyeing comments from European Central Bank president Mario Draghi in anticipation the region may require further stimulus in 2014, Martin said.

Reports from China will be closely watched this week as traders view Asia's largest economy as one of the bigger risks for 2014, Martin said.

China publishes its December export data on Wednesday and inflation data on Thursday.

In Australia, trade and building approval data are likely to be overlooked in favour of November retail sales figures on Thursday, although given the historic nature of the data it would have to be a significant surprise to move markets, Martin said.

New Zealand has the first GlobalDairyTrade auction of 2014 on Wednesday and building consent figures for November on Thursday.

(BusinessDesk)

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NZ Market Snapshot

Forex

Sym Price Change
USD 0.7878 -0.0004 -0.05%
AUD 0.9091 0.0005 0.06%
EUR 0.6356 -0.0003 -0.05%
GBP 0.5032 0.0001 0.02%
HKD 6.1123 -0.0013 -0.02%
JPY 92.8410 0.0020 0.00%

Commods

Commodity Price Change Time
Gold Index 1201.1 7.690 2014-11-21T00:
Oil Brent 78.6 -0.120 2014-11-21T00:
Oil Nymex 76.5 0.710 2014-11-21T00:
Silver Index 16.4 0.260 2014-11-21T00:

Indices

Symbol Open High Last %
NZX 50 5526.9 5526.9 5526.9 -0.56%
NASDAQ 4751.0 4751.6 4701.9 0.24%
DAX 9521.2 9736.1 9484.0 2.62%
DJI 17721.0 17894.8 17719.0 0.51%
FTSE 6678.9 6773.1 6678.9 1.08%
HKSE 23353.7 23508.0 23349.6 0.37%
NI225 17285.7 17381.6 17300.9 0.33%