NZ firms pick dollar to peak above US86c

NZ exporters will need to adapt to a higher 'norm' for the NZ dollar in the decade ahead, says the ASB Bank. Photo / NZ Herald

Economist says companies need to adapt to higher 'norm' for currency in decade ahead.

Kiwi businesses expect the New Zealand dollar to peak against the US dollar in June next year at US86.2c, according to ASB's kiwi dollar barometer.

The survey of exporters and importers with annual turnover of at least $1 million found exporters on average expected the dollar to peak at US85.8c in June before falling to US80.2c at the end of next year.

While importers had a slightly higher expectation with a peak at US86.6c and a decline to US84c.

The New Zealand dollar was trading at around US83.4c yesterday.

ASB chief economist Nick Tuffley said it was hard to pick why businesses believed the dollar would peak in June but it aligned with the bank's own view, although it is picking a lower peak of US84c.

"What we expect heading into the second half [of next year] is a global pick-up."

Tuffley said growth in America, the UK and Europe would strengthen their currencies against the New Zealand dollar.

Tuffley said before 2005 the dollar had averaged around US55c but businesses needed to adapt to a new norm with the dollar likely to be closer to a US70c average over the next 10 years.

"Businesses will need to adapt to higher exchange rates."

Tuffley said part of the challenge was New Zealand businesses getting used to different global dynamics with a lot more export opportunities in the Asia Pacific region compared with developed markets such as Europe.

The barometer also found New Zealand businesses believe New Zealand's high interest rate versus other countries and its attractiveness for safe-haven investment flows are the key drivers behind the current strength of the New Zealand dollar.

"It is no surprise that interest rates are seen as a significant reason for the New Zealand dollar's strength given current global rates.

"Businesses also evidently perceive New Zealand as a safe place for foreign investors to park their money, which may relate to the comparative calm of NZ's economic and fiscal positions," Tuffley said."

Meanwhile China and the US were expected to be the regions with the most influence over the New Zealand dollar versus the US dollar over the next 12 months.

Exporters believe China will have the most influence with just over 40 per cent of those surveyed pointing to it while just over 41 per cent of importers picked the US.