NZ Dollar Outlook: Kiwi may drop if data supports Fed rate hikes

The New Zealand dollar could drop this week in the face of US dollar strength as upcoming employment data stokes speculation the Federal Reserve will hike interest rates in December.

The kiwi may trade between 63.50USc and 67.50USc this week, according to 10 currency analysts surveyed by BusinessDesk.

Six expect it to weaken, two say it may advance and two bet it will remain largely unchanged. It recently traded at 65.17USc.

This week, even more attention than usual will be focused on Friday's US non-farm payrolls employment data, a closely watched barometer of the state of the world's largest economy, as investors refine their bets heading into the Fed's December 15-16 meeting where it is largely expected to hike rates from near zero.

The addition of about 200,000 jobs in November should cement bets for a hike, and underpin the US dollar, analysts say.

"As long as the data is as we expect, like a decent non-farm payrolls on Friday night, then the Fed should definitely be going on December 17," ASB Bank head of institutional FX sales New Zealand Tim Kelleher says.

"The New Zealand dollar should be on the defensive into the end of the week, so if we see a rally it will just get met with sellers. The kiwi should go lower."

​In New Zealand, building consent data for October and the ANZ business confidence survey were published today. Tomorrow, third-quarter terms of trade data is released and Quotable Value publishes its latest monthly housing market update.

Overnight on Tuesday, prices are expected to improve at the fortnightly GlobalDairyTrade auction, according to NZX milk futures. On Wednesday, ANZ releases its monthly commodity price index.

On Thursday, Auckland real estate agency Barfoot & Thompson is due to release its latest monthly house price data for the country's largest city, and Statistics New Zealand publishes data on third-quarter building work put in place.

Traders will be eyeing central bank meetings in Australia on Tuesday, Canada on Wednesday and Europe on Thursday.

Comments by Fed chairwoman Janet Yellen will also be closely watched this week, including a speech to the Economic Club of Washington on Wednesday and testimony to the Joint Economic Committee of the Senate on Thursday. Several other Fed officials are due to speak this week as well.

In China, reports due tomorrow will show how the manufacturing sector is tracking in Asia's largest economy. China is New Zealand's biggest export market.

Australia, New Zealand's second-biggest export market, has data on balance of payments, gross domestic product, trade and retail sales this week.

(BusinessDesk)