Dollar heads for 1.1% weekly gain as local outlook stays firm

 The New Zealand dollar is heading for a 1.1 percent weekly gain as the local outlook for economic growth remains firm, and as support for the greenback waned after a rapid appreciation in recent months.

The kiwi rose to 78.49 US cents at 5pm in Wellington from 77.67 cents on Friday in New York last week. It traded at 78.84 cents at 8am and 78.66 cents yesterday. The trade-weighted index slipped to 77.86 from 77.98 yesterday, and is heading for a 0.3 percent weekly gain from 77.67 last week.

A BusinessDesk survey of 11 traders, strategists and brokers predicted the kiwi would trade between 75.60 US cents and 79.30 cents this week. Seven expected the kiwi to remain relatively unchanged this week, and four expected it to rise.

New Zealand's economic outlook remained firm this week as Fonterra Cooperative Group affirmed its forecast payout to farmers of $5.30 a kilogram of milk solids, a manufacturing survey showed strong activity, and after the Reserve Bank reminded the market it was still going to raise interest rates at some stage, when releasing its six-monthly financial stability report.

"This week has been very uneventful for kiwi - it's really squeezed a bit higher all the way through the week which has been a bit more optimistic," said Raiko Shareef, currency strategist at Bank of New Zealand in Wellington. "We've been looking at the 79.40/50 (US cents) level, which has strong resistance - that held and we've thought that's going to be a bridge too far."

The local currency is heading for a 2.3 percent weekly gain against the yen amid mounting speculation Japan's government will call a snap election to gain a mandate to pass sweeping economic reforms, including a planned hike to the sales tax. The kiwi was little changed at 91.03 yen at 5pm in Wellington, near a seven-year high, from 91.02 yen yesterday.

The kiwi rose to 50.05 British pence from 49.86 pence yesterday as investors dumped the currency after the Bank of England this week downgraded its inflation forecast, and dented the prospect of higher interest rates.

The local currency fell to 63.01 euro cents from 63.21 cents yesterday, and dropped to 90.26 Australian cents from 91.02 cents.

(BusinessDesk)