Tough week shaping up for NZ dollar

  • 18/01/2016
Tough week shaping up for NZ dollar

By Tina Morrison

The New Zealand dollar may fall this week on concern about the impact on the local economy of slower Chinese growth, weak dairy prices and low inflation.

The kiwi may trade between 63 US cents and 66.50 cents this week, according to a BusinessDesk survey of eight currency analysts.

Five expect the local currency to decline while three pick it will end the week higher. It recently traded at 64.36 US cents.

Investor concern so far this year has been focused on the likelihood that weaker growth from China, Asia's largest economy, will weigh on the rest of the world. China accounts for about a third of global growth and data due out tomorrow is expected to confirm the country slowed last year.

The GlobalDairyTrade auction tomorrow night will likely confirm prices for New Zealand's largest commodity export remain weak while inflation data due Wednesday will miss the Reserve Bank's target.

"Over the week ahead, we expect the downward pressure on the New Zealand dollar to continue," ASB economist Kim Mundy said.

The New Zealand Institute of Economic Research tomorrow publishes its quarterly survey of business opinion, which is expected to show business confidence improved towards the end of last year, although the survey doesn't directly cover the agricultural sector.

Fourth-quarter inflation data due out Wednesday is expected to show consumer prices continue to undershoot the Reserve Bank's 1 percent-to-3 percent target band. Annual inflation was just 0.4 percent in 2015, based on the both the Reserve Bank and economist forecasts. A weaker track for inflation increases the prospects of a further cut to the official cash rate, now back at its record-low level of 2.5 percent.

Tomorrow afternoon, the Real Estate Institute expects to publish its latest house price data for December, which will be closely watched for signs of cooling in the Auckland market.

On Thursday, the latest data includes the BNZ-BusinessNZ performance of manufacturing index for December, and the ANZ-Roy Morgan consumer confidence index for January.