Dollar Outlook Kiwi may gain an improving risk sentiment, US economic concerns

The New Zealand dollar may gain this week as improving global sentiment turns investor focus to higher risk, higher growth assets such as the kiwi.

The local currency may trade between 80.40 US cents and 84.30 cents this week, according to a BusinessDesk survey of 11 traders and strategists. Seven predict the kiwi will rise this week, while three expect it to remain largely unchanged and one expects a drop. It recently traded at 82.75 US cents from 82.83 cents at 8am.

Investors are more comfortable with higher risk investments such as the New Zealand dollar as concerns about emerging markets fade. The US dollar may soften this week amid concerns about employment growth, looming debt negotiations and ahead of data expected to show retail sales failed to grow in January.

"The run to quality has ceased as emerging market fears have subsided somewhat and risk is certainly coming back on," said Stuart Ive, senior advisor at OMF.

Incoming Federal Reserve chairman Janet Yellen is scheduled to give her inaugural semi-annual monetary policy report to US lawmakers tomorrow night, just days after employment data showed the weakest two months of job growth in three years. All eyes will be on Yellen as traders look for clues on the future of the Fed's US$10 billion a month tapering of its monetary stimulus programme.

"While I think it is a little bit premature to think that the Fed will consider cutting back on the taper, it does seem to have given the market a bit of a boost, the US dollar got sold off, stock markets rose, so a little bit of risk is coming back in," Ive said.

Concern about US borrowing may weigh on the US dollar this week, after Treasury secretary Jacob Lew urged Congress to raise the debt ceiling as US borrowing authority may run out from Feb. 27. Congress goes into recess the week of Feb. 17, returning the week of Feb. 24, increasing the urgency.

On Thursday, data is expected to show US retail sales were little changed in January as stormy winter weather kept consumers out of stores.

"If that comes in weak again we will see the US dollar get sold off further and we will go higher," said OMF's Ive.

In New Zealand, the housing market comes into focus this week as state value Quotable Value releases its latest data today and industry group the Real Estate Institute of New Zealand publishes its figures at the end of the week.

The reports may show Reserve Bank of New Zealand restrictions on high debt lending, introduced Oct. 1, and looming interest rate rises have softened volumes and prices, said OMF's Ive.

Electronic card transactions for January, to be published on Wednesday, will probably continue its upward momentum, while the Performance of Manufacturing Index on Thursday will likely show further growth and food price data on Friday will probably jump at the start of the year, Robin Clements, an economist at UBS New Zealand, said in a note.

In Australia, economists will be eyeing the NAB business confidence survey tomorrow and the Westpac-Melbourne Institute consumer sentiment survey on Wednesday. Employment figures for January, to be released on Thursday, may show the unemployment rate increased as more people searched for jobs.

Other major releases scheduled for this week include the Bank of England's quarterly inflation report on Wednesday, where traders will be looking for any change to forward guidance.

Japan publishes its balance of payments data today and a report on consumer confidence ahead of a holiday tomorrow.

China releases data on loans for January today and has trade figures on Wednesday and inflation on Friday.

Traders are keeping an eye on China's banking sector amid liquidity concerns as the People's Bank of China warned at the weekend about increased interest rate volatility and said it would step up monitoring in the sector, Ive said.

(BusinessDesk)

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NZ Market Snapshot

Forex

Sym Price Change
USD 0.7740 -0.0003 -0.04%
AUD 0.9511 0.0005 0.05%
EUR 0.6324 -0.0002 -0.03%
GBP 0.4954 0.0001 0.02%
HKD 6.0039 0.0001 0.00%
JPY 92.5100 -0.0050 -0.01%

Commods

Commodity Price Change Time
Gold Index 1195.4 -2.890 2014-12-19T00:
Oil Brent 61.4 1.580 2014-12-19T00:
Oil Nymex 57.1 2.910 2014-12-19T00:
Silver Index 16.0 0.096 2014-12-19T00:

Indices

Symbol Open High Last %
NZX 50 5518.5 5545.0 5539.3 -0.21%
NASDAQ 4752.6 4782.1 4748.4 0.36%
DAX 9901.3 9901.3 9811.1 -0.25%
DJI 17778.0 17874.0 17778.2 0.15%
FTSE 6466.0 6566.9 6466.0 1.23%
HKSE 23158.3 23189.6 22832.2 1.25%
NI225 17511.0 17621.4 17210.0 2.39%