Parity with Aussie dollar tipped

The Australian dollar is being roped in by its New Zealand counterpart, according to an ASB survey. Photo / Sarah Ivey

Dairy prices and Canterbury rebuild helping underpin currency, says ASB.

About 70 per cent of businesses surveyed by ASB Bank expect the New Zealand dollar to reach parity with the Aussie dollar over the coming year.

Conversely, the survey of 394 businesses, taken in late January and early February, showed that respondents expected the NZ/US dollar rate to ease over the coming year from its current high levels of around US84.8c.

ASB's latest issue of its quarterly Kiwi Dollar Barometer said a greater proportion of small businesses saw the surge in the NZ/Aussie dollar cross rate as having a negative effect on their operating margins, relative to big business.

The NZ/Australian dollar cross rate has risen from A80c to A94c over the past year, reflecting the diverging paths of the two economies, the bank said. The NZ/Aussie crossrate was yesterday quoted at A93.9c.

Rising global dairy prices, the Canterbury rebuild and a stronger household sector supported the New Zealand economic growth outlook, which in turn had underpinned the currency, ASB said.

In contrast, the challenge for the Australian economy was the extent to which the non-mining sectors could pick up enough to offset the slowing mining sector.

"These differing growth prospects between NZ and Australia are supporting NZ/Australian dollar strength," the bank said.

ASB said 82.3 per cent of importers in the survey group expected the kiwi dollar to reach parity with the aussie over the coming year, compared with just 48.5 per cent of exporters surveyed.

The survey result was at odds with the ASB's economics department, which expects the NZD/Australian dollar to track around A93c to A94c over the next six months before easing.

However, the survey was more in keeping with the department's forecast for the NZ/US dollar.

Importers, on average, expect the NZD/US dollar to track US83c to US84c over the coming six months, before gradually easing to reach US81.4c by March, 2015.

Exporters, on average, expect the NZD/US dollar to ease over the coming year to reach US78.2c by March 2015.

The economics team expects a sharper easing in the NZD/US dollar rate over the coming year, as the US economy picks up and the Federal Reserve continues to withdraw monetary policy stimulus. ASB expects the NZD/US dollar rate to fall to US77c by March next year.

ASB said businesses' interest to hedge their currency risk had fallen in the latest quarter, driven by a decline in the proportion of exporters wanting to secure cover.

The bank said this was a likely reflection of growing confidence among exporters that the kiwi would ease against the US dollar over the coming year.

The ASB's Barometer tracks exporters' and importers' exposures to foreign exchange risk, through surveying businesses with annual turnover of at least $1 million.