NZ dollar outlook: Kiwi may rise as traders await new impetus following declines

The New Zealand dollar has fallen 15% against the greenback so far this year, reflecting weaker economic growth, falling dairy prices, lower interest rates and a pick up in the US. Photo / NZME.

The New Zealand dollar may advance this week as traders have already priced in a weaker dairy sector and there is little new information scheduled for release to drive the currency further.

The kiwi may trade between 64.80 US cents and 67.70 cents this week, according to a BusinessDesk survey of 11 currency advisers.

Seven expect the currency to gain, while four say it will be little changed. None expect it to decline. The local currency recently traded at 66.06 US cents.

The New Zealand dollar has fallen 15 per cent against the greenback so far this year, reflecting weaker economic growth, falling dairy prices, lower interest rates and a pick up in the US.

While the local currency is expected to continue to decline this year, there is a dearth of major local data to drive it lower this week in a market where traders are already strongly positioned for the kiwi to fall.

"Current trends are fairly close to exhaustion," said ANZ Bank New Zealand senior FX strategist Sam Tuck.

"In order to drive it further you need some new information or a new trend or a new theme to emerge."

"Long-term, we still see the risks firmly to the downside for the kiwi/US, it's just we are at one of those points where the positions in both the US and New Zealand are very well understood and very well priced by the markets and so people will be lightening up on their positions having gained what they can and that means kiwi will go just a little bit higher."

ANZ's Tuck said the key focus for Australian and New Zealand currency traders this week would be Wednesday's release of Chinese July data on fixed asset investment, industrial production and retail sales.

China is the largest trading partner for both countries and data releases at the weekend underpinned concern about a slowdown in the country's economy.

The producer price index dropped a larger-than-expected 5.4 per cent in July from a year earlier, according to China's National Statistics Bureau on Sunday. It was the largest drop since October 2009.

A separate report on Saturday showed China's exports plunged a bigger-than-expected 8.3 per cent in July.

In New Zealand, July data scheduled for release this week includes electronic card spending on Tuesday, Real Estate Institute house prices on Wednesday, and the BNZ-BusinessNZ performance of manufacturing index and food prices on Thursday.

The accommodation survey for June is due on Wednesday while retail trade data for the second quarter is out Friday.

In the US this week, all eyes will be on July retail sales data due Thursday as investors mull the prospects for an interest rate hike next month. Further clues may come from scheduled speeches by Atlanta Fed President Dennis Lockhart today, and New York Fed President William Dudley on Wednesday.

Other US economic data scheduled for release this week include NFIB small business index, productivity and costs, and wholesale trade, due Tuesday; Atlanta Fed business inflation expectations, due Wednesday; weekly jobless claims, import and export prices, and business inventories, due Thursday; producer price index, industrial production, and consumer sentiment, due Friday.

Australia has reports on business and consumer confidence and the second-quarter wage price index scheduled for release this week. Reserve Bank of Australia deputy governor Philip Lowe is giving a speech on 'National Wealth, Land Values and Monetary Policy' on Wednesday, while assistant governor (economic) Christopher Kent is speaking on 'Recent Labour Market Developments' on Friday.