NZ dollar outlook: Kiwi may fall on global growth concerns

BUSINESSDESK: The New Zealand dollar may fall this week as investors search for fresh clues on the pace of global growth, while Europe struggles to find a credible solution to its debt crisis.

The kiwi recently traded at 80.68 US cents little changed from 80.65 cents at 8am. That is right in the middle of this week's trading forecast of 79.50 cents to 82 cents, according to a BusinessDesk survey of six analysts.

Four analysts predict the kiwi will finish the week lower and two higher.

Upbeat American consumer confidence on Friday added to the string of better-than-expected US figures, which has eroded speculation the Fed will increase its monetary stimulus.

Investors are preparing for the latest minutes from the Federal Open Market Committee meeting on Wednesday, with traders reluctant to change their bets before the Fed’s next summit in Jackson Hole, Wyoming, on August 31.

"Everyone is waiting to see what the American's will do. Every little bit of data points to them sitting on their hands and not doing much," Derek Rankin, director at Rankin Treasury Advisory, says.

Data out of the world's largest economy this week includes US existing home sales on Wednesday, forecast to have climbed 3.3% to a 4.25 million annual rate last month, following a 4.37 million pace in June, according to a Bloomberg survey.

Jobless claims and new home sales are out on Thursday, followed by durable goods orders on Friday.

Australia, New Zealand’s largest trading market, will release the minutes from the Reserve Bank's August meeting tomorrow.

The bank kept the official cash rate unchanged at 3.5% at its last meeting despite warning the strength on the currency is affecting the local economy. The kiwi was unchanged on 77.35 Australian cents.

"The Aussie/Kiwi cross will be the main focus this week," says Tim Kelleher, head of institutional FX sales NZ ASB Institutional. The RBA could "mention the high dollar again. They're not going to intervene. Certainly, though, they would like to see it lower to make the economy more competitive."

The euro extended gains on optimism policymakers are closer to finding a solution for the debt crisis, even as German Finance Minister Wolfgang Schaeuble ruled out another aid programme for Greece.

European leaders returning from holiday will meet in Paris for the first time in over about a month this week to discuss measure to support Greece and prevent Italy and Spain from being shut out of the euro.

European Central Bank policymakers are set to gather again in September, when it is expected they will announce the limits on government bond yields to help contain the region's debt crisis.

"It's hard to imagine that leaders will come out with anything in advance of September's meeting," says Alex Sinton, senior dealer at ANZ New Zealand. "The reality is that they need to do something otherwise the market will be disappointed pretty quickly."

Europe's PMI will also be released on Thursday. In Britain, investors will be eyeing the second estimate for June quarter gross domestic product, forecast to come in at 0.5%.

"The PMIs will be the highlight of the quiet week," saysMike Jones, market strategist at Bank of New Zealand. "The expectation is that Europe will improve. We will need to see an improvement to keep risk-on intact."

China, New Zealand's second-largest export market, will release its performance of manufacturing index on Thursday.

In New Zealand, earnings season is now well under way with the biggest companies on the bourse,  telecommunications company Telecom and construction company Fletcher Building, due to report this week.

The BNZ-Business NZ Performance of Services Index released today remained in expansion in July, though the pace eased for a second straight month. New orders/business continued to show the strongest growth.

International travel and migration figures from Statistics NZ will be released tomorrow, followed by overseas merchandise and trade on Thursday.

The Reserve Bank survey of expectations and the National Bank of New Zealand regional trends survey will also be released tomorrow.