Dollar Outlook: Kiwi may consolidate as traders look overseas for direction

The New Zealand dollar may consolidate around current levels as traders look overseas for direction in a week where geopolitics are likely to be the focus in the absence of major economic data.

The kiwi will probably trade between 83 US cents and 86 cents this week, according to a BusinessDesk survey of eight traders and strategists. Four predict the kiwi will remain largely unchanged this week, while three expect it may gain and one predicts a drop. It recently traded at its 200-day moving average of about 84.60 US cents.

The New Zealand dollar has been in decline since touching a high of 88.35 US cents last month amid weakening commodity prices, a pause in interest rate hikes, Reserve Bank intervention threats and increased demand for the greenback. In a data light week, traders will be weighing sentiment on tensions in Ukraine and Iraq for currency market direction, traders said.

"In the week ahead, we expect that geopolitics will remain a key focus," Bank of New Zealand currency strategist Raiko Shareef said in a note. "The absence of top-tier data will help keep the focus on current affairs. While downside momentum for NZD/USD might be fading...the overall negative tone for NZD remains intact. But patience may be required this week."

In New Zealand this week, the Real Estate Institute expects to publish its monthly housing data for July on Tuesday or Wednesday. The report will probably reaffirm weak sales and cooling price inflation, Robin Clements, an economist at UBS New Zealand, said in a note.

On Thursday, the BNZ-BusinessNZ Performance of Manufacturing Index will probably show manufacturing remains in expansionary territory, while second quarter retail sales volumes likely rose 1 percent, Clements said.

In Australia, business confidence and house price reports are due tomorrow, followed by consumer confidence and wage inflation on Wednesday. Elsewhere, traders will be eyeing GDP data in Europe, Japan and the UK.

The US also has data on retail sales and industrial production, while Europe and the UK have inflation reports and the UK also has employment data.

(BusinessDesk)