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Home / Bay of Plenty Times / Business

Division over dollar direction

By Tina Morrison
NZME. regionals·
26 Jan, 2016 03:00 AM2 mins to read

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Views are split on the direction of the New Zealand dollar is heading.

Views are split on the direction of the New Zealand dollar is heading.

Views are split on the direction of the New Zealand dollar heading in to the Reserve Bank's review of interest rates on Thursday amid global market uncertainty.

The kiwi may trade between 63.50 US cents and 66.80 cents this week, according to nine currency advisers surveyed by BusinessDesk. Four expect a gain, four predict a decline and one is betting it will be little changed. It recently traded at 64.67 US cents.

All eyes are on central banks this week, with meetings scheduled for the Federal Reserve, the Bank of Japan and the Reserve Bank of New Zealand. Investors are betting on additional stimulus this year in response to global market volatility following a slump in oil prices, weak inflation, falling commodity prices and forecasts for lower economic growth.

"Following the market shenanigans in the brief period since this year has started, markets are not surprisingly nervous," said Peter Cavanaugh, client adviser at Bancorp Treasury Services. "Fresh in the local market's mind is the fact that the Reserve Bank cut the cash rate in December and whilst no one is expecting them to do so this week, the worry is what sort of language that is going to come out.

"Staunchness, provided it's credible, will give the New Zealand dollar some support but any hints that the Reserve Bank are wavering towards another OCR cut could see the New Zealand dollar weaken very quickly," said Cavanaugh. "In this heightened uncertainty, central banks' role has become more pronounced."

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The Reserve Bank will release a one-page statement on its Official Cash Rate at 9am on Thursday, following the Federal Reserve statement at 8am.

Neither bank is expected to change its monetary policy settings although the outlook comments will be closely eyed.

The Bank of Japan reviews its policy on Friday.

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Other releases scheduled for New Zealand this week include the government's latest financial statements and December data for the service sector today, merchandise trade on Thursday, and building consents and credit growth on Friday.

- BusinessDesk

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