NZ dollar could rise if interest rates cut
The New Zealand dollar may rise this week on the prospects that the Reserve Bank of Australia will cut interest rates while prices are seen rising at the latest dairy auction.
The kiwi may trade between 68 US cents and 72 cents this week, according to 11 currency analysts surveyed by BusinessDesk. Six expect a gain, two pick a decline and three say it will likely remain relatively unchanged. It recently traded at 70.12 US cents.
All eyes will be on whether the RBA reduces its 2 percent benchmark interest rate tomorrow after bets increased following weaker than expected Australian inflation data last week.
The kiwi has jumped 3.7 percent against the Aussie since the data was released.
Some 37 of 48 economists in a Reuters poll taken on Friday expect the RBA to keep its policy on hold, with 11 anticipating a 25 basis point reduction. Traders are more evenly split, pricing in a 55 percent chance of a 25 basis point cut.
"The key mover is going to be the RBA tomorrow - that's going to be very much the big noise of the week in terms of the kiwi," said Stuart Ive, OMF senior dealer, foreign exchange.
"There's a raised expectation that the Australians will cut rates tomorrow."
Ive says a cut by the RBA would probably push the kiwi higher against the US dollar as investors favour the kiwi over the Aussie, while the kiwi is likely to remain relatively unchanged if the RBA remains on hold.
However, he says the kiwi is unlikely to break through its resistance level of about 71 US cents.
"We need data to really push us through and I don't think we're really going to see it this week," he said.
In New Zealand this week, OMF expects prices for whole milk powder, New Zealand's key commodity export, to gain 4-to-5 percent at Wednesday morning's GlobalDairyTrade auction.
Overall, GDT prices may gain 2-to-3 percent, which would mark the third straight auction gain.
Labour market due Wednesday is expected to show the unemployment rate increased to 5.5 percent in the March quarter, from 5.3 percent in the December quarter, however OMF's Ive said that's unlikely to weaken the kiwi.
Monthly reports due out this week include Quotable Value housing data on Wednesday, and the ANZ monthly commodity price index on Wednesday, while new vehicle sales data may be released tomorrow and Barfoot & Thompson's Auckland house sales data will likely be published on Thursday.