NZ Dollar Outlook: Kiwi faces volatile week heading into US holiday as key data looms

The New Zealand dollar may be volatile this week amid lower liquidity during a holiday-shortened trading week in the US, and as investors look to upcoming data for signals on key interest rate reviews looming next month.

The kiwi may trade between 64.30 US cents and 67.10 cents this week, according to a BusinessDesk survey of 11 currency analysts. Five expect it to gain, two say it may fall and four are betting it will remain largely unchanged. The local currency recently traded at 65.20 US cents.

Currency markets may experience low volumes and poor liquidity this week as traders take an extended break around the US Thanksgiving holiday on Thursday. Traders may also be unwilling to take positions ahead of the last key US data releases next week on employment and manufacturing before the Federal Reserve makes a decision on interest rates on Dec. 17, with speculation rising that it will hike. Ahead of that, the European Central Bank is due to review its policy next week, with the Reserve Bank of New Zealand up for review the following week.

"New Zealand dollar and currency markets are in wait-and-see mode ahead of next week's pivotal US data releases and ECB meeting," ANZ Bank New Zealand economists said in a note. "This week is holiday shortened and likely to be illiquid and volatile with risks of a squeeze in NZD/USD."

In New Zealand this week, October trade data due on Thursday is expected to continue to show a deficit.

This week, the Reserve Bank releases monthly data on mortgage lending restrictions on Wednesday, and foreign exchange reserves on Friday.

In the US, data releases will be compressed into the first half of the week due to the Thanksgiving holiday. Releases are scheduled for consumer confidence, third-quarter gross domestic product, manufacturing, housing and durable goods orders.

Asia may be quieter at the start of the week due to a Japanese holiday today. Later this week, Japan has employment and inflation data.

Across the Tasman, Reserve Bank of Australia governor Glenn Stevens is scheduled to speak to the Australian Business Economists annual dinner tomorrow, while assistant governor (financial markets) Guy Debelle speaks in London the following day at an FX Week Europe conference.

Australia has data on construction and capital spending this week.

Elsewhere, Europe has manufacturing data and the UK publishes third-quarter GDP.

(BusinessDesk)