Will the Kiwi rise above US70c?


By Tony Field

The New Zealand dollar has eased slightly to 68 US cents, but ASB Bank economists believe it could soon be trading above 70 US cents.

ASB's chief economist Nick Tuffley says they had previously thought the New Zealand dollar would trade in the low 60s against the US currency this year.

But he says they have been surprised by a number of factors. One of those factors is the prospect of fewer rate hikes than expected in the United States.

Weak deposit rates in the US make New Zealand look more attractive to people with money to invest.

Mr Tuffley says: "It is unlikely the New Zealand dollar will decline materially from here. It is more likely to drift higher into the low 70s."

He is also predicting the Reserve Bank will lower the Official Cash Rate (OCR) to 1.75 percent this year.

The high dollar, low inflation and the weak dairy prices will all be factors that the Reserve Bank considers when it reviews the OCR.

Fresh house price data due out in the new few days will also be important.

Yesterday the Westpac-McDermott Miller Employment Confidence Index showed optimism is rising.

The Index rose 3.3 points to 104.8 in the March quarter, gaining for a second period from a three-year low in September. A reading of more than 100 means there are more optimists than pessimists.

But the survey found the rise in confidence is largely being driven by Auckland and Canterbury. People living in rural areas are less optimistic.


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