NZ dollar outlook: Kiwi may trade in recent range as fiscal cliff, stocks eyed

US Treasury Secretary Timothy Geithner: A good meeting

The New Zealand dollar may trade within its range of the past two months in a week shortened by Thanksgiving in the US as traders ponder the chances of America finding consensus over the fiscal cliff and as the currency takes its lead from equity markets.

The kiwi traded recently at 81.21 US cents, little changed from Friday in New York. That is closer to the bottom of the range seen this week in a BusinessDesk survey of 80.50 US cents to 82.50 cents.

While US Treasury Secretary Timothy Geithner reported "a good meeting" between President Barack Obama and congressional leaders with the possibility of a deal within weeks, market participants are recalling the protracted talks over the US debt ceiling a year ago and the resultant downgrade of the sovereign credit rating.

"The fiscal cliff discussions are going to bounce around," says Imre Speizer, senior markets strategist at Westpac Banking Corp. "It's too early to suggest resolution on that one."

If US political leaders cannot compromise, the world's biggest economy could contract early in the New Year as consumers and businesses slam on their spending brakes at the same time as taxes rise and the government is forced to cut its programmes.

Mr Obama is seeking to head off a combined $US607 billion in automatic tax increases and spending cuts. He must also negotiate an increase in the federal debt ceiling that is expected to be breached by year's end.

Economic figures out of New Zealand today painted a more benign picture of the domestic economy. The BNZ-Business New Zealand performance of services index rose 7.5 points to 57.4, seasonally adjusted, in October in its biggest monthly gain since the survey began in 2007, raising questions about whether it was a rogue number.

It follows weak retail sales figures and a jump in third-quarter unemployment.

The producers price index showed input and output prices both fell in the third quarter, confirming last month's inflation figures showing the consumer price index rose a smaller-than-expected 0.3% in the third quarter. The annual pace of 0.8%was below the central bank's 1% to 3% target band.

Traders see a 27% chance of the Reserve Bank cutting the official cash rate from a record low 2.5% on December 6.

Before then, the Reserve Bank of Australia releases the minutes of its last policy meeting tomorrow and traders will be watching for any word a rate cut next month is on the cards.

Alex Sinton, senior dealer at ANZ New Zealand, says the market is also looking for any word on capital spending in Australia's resources sector, amid concern it may have peaked.

The New Zealand dollar recently traded at 78.43 Australian cents, little changed from 78.45 cents on Friday in New York and down from as high as 80.81 cents on October 2.

Mr Sinton says there is a chance the kiwi ends the week higher if traders close off some of their positions before the long US weekend. Below 80.50 US cents "there is a lot of underlying demand".

Investors will get fresh clues about demand for the exports of both countries down under on Thursday with the release of China's HSBC Flash PMI for November. The PMI was 47.4 in the previous month, a reading that signals contraction.

Derek Rankin, director at Rankin Treasury Advisory, says the direction of US equities will be a big driver of growth-linked currencies such as the kiwi and Australian dollars this week.

While the Dow Jones Industrial Average managed a 0.4% gain on Friday the benchmark index has fallen 7% in the past month. "The sharemarket is the driver here," he says.

(BusinessDesk)

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2 Comments & Questions

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Maybe not the best place for my comments, but come on NZ manufacturers, you have never had it so good.....US/NZ $ high, AUS/ NZ $ low. Food growers,OK resistance to buying NZ in Australia......solve it! Maybe donate a dollar to the favorite AUS charity to get accepted, get it packed in Aus or " includes imported ingredients"...... Just solve the problem.
And if that does not work try selling to Costco in the US - they sell fresh and frozen fish from FIji & Marshall Islands. If US can eat Tliapia and Catfish from the muddy waters of Vietnam surely NZ can convince them to eat our clean fish from the clean waters of the Pacific
Be proud of the superior food products you have and get out and sell them I am a Kiwi spending time in US and I can see that you are underselling yourselves.

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I hope you're reporting your worldwide income to the U.S. and reporting your New Zealand bank accounts to the U.S. treasury with FBAR (fine of $10k per account per year if you didn't know, if you did $100,000 per account per year and prison) as required by any U.S. person this includes green card holders.

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NZ Market Snapshot

Forex

Sym Price Change
USD 0.8012 0.0052 0.65%
AUD 0.9077 0.0006 0.07%
EUR 0.6252 0.0028 0.45%
GBP 0.4952 0.0024 0.49%
HKD 6.2173 0.0415 0.67%
JPY 85.2240 0.1390 0.16%

Commods

Commodity Price Change Time
Gold Index 1244.2 5.700 2014-10-20T00:
Oil Brent 85.4 -0.760 2014-10-20T00:
Oil Nymex 82.8 -0.040 2014-10-20T00:
Silver Index 17.3 0.020 2014-10-20T00:

Indices

Symbol Open High Last %
NZX 50 5197.9 5238.9 5197.9 0.68%
NASDAQ 4254.2 4316.9 4258.4 1.35%
DAX 8819.3 8834.7 8850.3 -1.50%
DJI 16373.1 16401.6 16380.4 0.12%
FTSE 6310.3 6320.3 6310.3 -0.68%
HKSE 23073.4 23231.5 23070.3 -0.25%
NI225 15115.3 15115.3 15111.2 -1.66%