How Trump's trouble is hitting greenback, making holidays cheaper for Kiwis

A strong kiwi dollar makes US destinations such as Hawaii more affordable for Kiwi travellers.

The kiwi dollar is forecast to keep tracking well over US70c for the next 12 months.

Economists at ASB expect the New Zealand dollar to be trading at about 74c against the greenback during the next year as President Donald Trump struggles with his domestic agenda causing the United States dollar to weaken.

While great news for Kiwis travelling overseas, it puts more pressure on exporters and New Zealand tourism businesses whose overseas visitors' spending power is reduced.

ASB chief economist Nick Tuffley said forecasts had changed considerably since the bank's Kiwi Dollar Barometer in March, with the currency now expected to gain ground against the US dollar over the next 12 months.

Exporters and importers do have a different view - predicting a fall in the kiwi - but they were surveyed before the latest political ructions in Washington.

''When we had Donald Trump get elected with a hiss and a roar and come flying into the White House in January he was looking all 'Thunderbirds Are Go' for taking action,'' said Tuffley.

Trump had promised tax reform, including an amnesty for US companies overseas which would have resulted in stronger flows of money back into that country.

''But . . . things in the US things are getting very bogged down and we've had quite a rethink on how quickly Donald Trump will get any fiscal package through - we think it's a long time off.''

The White House has become embroiled in scandal over links to Russia and Trump being accused of lying by his fired FBI head.

The New Zealand dollar had become ''turbo charged'' in recent weeks due to political fallout from this, Tuffley said.

''It's put the US dollar on the back foot in recent weeks and it's highlighting the way in which the presidency is getting bogged down.''

While the Federal Reserve is today widely expected to lift interest rates to between 1 per cent and 1.25 per cent, this had already been priced in.

And if the Fed did temper expectations of further interest rate rises, this could provide more impetus for the kiwi, said Tuffley.

He said exporters had learned to cope with a higher New Zealand currency, although when it went over US80c it did put them under pressure.

The kiwi had also resumed its climb against the Australian dollar and Tuffley said there was a ''risk'' of parity.

''It isn't our core view but we do see the New Zealand economy continuing to perform well and if anything we're likely to see interest rates lift earlier in New Zealand than they do in Australia.''

The ASB survey asked about the extent to which businesses use external support for foreign exchange hedging and trade recommendations, and in writing and monitoring treasury policy.

Findings of the quarterly survey reveal larger firms are more likely to seek outside support: with 99.2 per cent of firms with more than $150 million revenue range engage outside assistance, compared with just 77.8 per cent of firms in the $1m-$30m range.

"Larger firms are more likely to pay for detailed, firm-specific assistance, perhaps reflecting the more complex nature or magnitude of their FX transactions," Tuffley says.

Banks are the main overall source of external foreign exchange support across respondents, followed by accountants and treasury advisory firms.

Tuffley said it was encouraging more businesses were hedging against currency fluctuations.

''The key thing with currency outlooks is not running a business off what you think a currency will do but making sure you have thought about having adequate protection in case the currency does something that you would not want.''