tigerlily
20th February 2007, 08:40 AM
from stuff.co.nz
Kiwi dollar eyes US80c
By ALAN WOOD - The Press | Tuesday, 20 February 2007
The kiwi dollar could soon be headed for US80c or higher with currency analysts warning that exporters should take forward cover to cover that risk.
Two analysts say that on a chart-basis the kiwi is finely balanced on a pivot point and there is a good chance it will push significantly up, harming export competitiveness.
But also there is a risk the currency could suddenly drop towards US60c, making it difficult to take a forward bet on how to manage risk, they say.
Pivotal to any move higher was the fortunes of the greenback which was reacting primarily to US data. Any weakness in that economy was likely to see the dollar lose ground against other currencies, market watchers said.
Canterbury Manufacturers' Association chief executive John Walley said for every cent above US60c the kiwi was hurting manufacturers and above US70c firm owners were saying it was too tough and "say we're just going to pack up and go somewhere else".
The volatility of the dollar was one of the reasons manufacturers could not easily hedge. Positive macroeconomic policies needed to be set by the Government.
Christchurch-based Charles Levin – an independent currency trader and adviser to exporters – said currency trading positions suggested there was more in the offing for the volatile kiwi either down or more likely up. The kiwi could trade as high as US80c, particularly if the greenback continued to look sick and the low interest rate scenario in Japan remained in place.
Yesterday morning the kiwi spiked to its highest levels against the greenback in more than three weeks, finishing around US70.21c at the 5pm close.
"We're at what I call a pivot. We've either got to start going back down straight away or keep going up. If we go up we're going to blow right through the old highs," Levin said.
The kiwi hit around US74.65c in March 2005.
ANZ says currency sensitive firms have been hurt by the strong kiwi.
ANZ senior dealer and technical analyst Mark Elliott said he agreed the kiwi was at a pivot point and could go either down or up to US80c.
The recent move down from US71c looked like a corrective move rather than the start of a deeper move downwards.
BNZ currency strategist Danica Hampton said the kiwi had been supported by the hawkish stance by RBNZ governor Alan Bollard, and strong recent local data including last week's retail sales and employment figures before that.
About 80% of the market was picking that Bollard would raise rates at the official cash rate review on March 8. Some economists were picking a second increase later.
The greenback is already under fire from a recent spate of poor US economic reports. Upcoming US consumer price index data this week would likely weigh on the dollar unless stronger than expected.
Federal Reserve Monetary Policy minutes would also be eyed.
Also the Bank of Japan was to make a crucial choice on interest rates on Wednesday.
"There's a risk that if they don't (rise) we will see a lot of Japanese yen selling and buying of kiwi – so a resurgence of the carry trade.
"That's a potential upside risk for the currency," she said.
Westpac currency strategist Michael Gordon said he expected the kiwi to trade around US70c for much of the first half of this year, then trend down to US65c by the year's end.
The market had already priced in a RBNZ interest rate rise and it was likely Bollard would not rule out another one later on.
The kiwi could move higher, but that would be driven by US dollar moves.
"If people start talking about the Fed cutting rates again, that could certainly take the US dollar lower."
Kiwi dollar eyes US80c
By ALAN WOOD - The Press | Tuesday, 20 February 2007
The kiwi dollar could soon be headed for US80c or higher with currency analysts warning that exporters should take forward cover to cover that risk.
Two analysts say that on a chart-basis the kiwi is finely balanced on a pivot point and there is a good chance it will push significantly up, harming export competitiveness.
But also there is a risk the currency could suddenly drop towards US60c, making it difficult to take a forward bet on how to manage risk, they say.
Pivotal to any move higher was the fortunes of the greenback which was reacting primarily to US data. Any weakness in that economy was likely to see the dollar lose ground against other currencies, market watchers said.
Canterbury Manufacturers' Association chief executive John Walley said for every cent above US60c the kiwi was hurting manufacturers and above US70c firm owners were saying it was too tough and "say we're just going to pack up and go somewhere else".
The volatility of the dollar was one of the reasons manufacturers could not easily hedge. Positive macroeconomic policies needed to be set by the Government.
Christchurch-based Charles Levin – an independent currency trader and adviser to exporters – said currency trading positions suggested there was more in the offing for the volatile kiwi either down or more likely up. The kiwi could trade as high as US80c, particularly if the greenback continued to look sick and the low interest rate scenario in Japan remained in place.
Yesterday morning the kiwi spiked to its highest levels against the greenback in more than three weeks, finishing around US70.21c at the 5pm close.
"We're at what I call a pivot. We've either got to start going back down straight away or keep going up. If we go up we're going to blow right through the old highs," Levin said.
The kiwi hit around US74.65c in March 2005.
ANZ says currency sensitive firms have been hurt by the strong kiwi.
ANZ senior dealer and technical analyst Mark Elliott said he agreed the kiwi was at a pivot point and could go either down or up to US80c.
The recent move down from US71c looked like a corrective move rather than the start of a deeper move downwards.
BNZ currency strategist Danica Hampton said the kiwi had been supported by the hawkish stance by RBNZ governor Alan Bollard, and strong recent local data including last week's retail sales and employment figures before that.
About 80% of the market was picking that Bollard would raise rates at the official cash rate review on March 8. Some economists were picking a second increase later.
The greenback is already under fire from a recent spate of poor US economic reports. Upcoming US consumer price index data this week would likely weigh on the dollar unless stronger than expected.
Federal Reserve Monetary Policy minutes would also be eyed.
Also the Bank of Japan was to make a crucial choice on interest rates on Wednesday.
"There's a risk that if they don't (rise) we will see a lot of Japanese yen selling and buying of kiwi – so a resurgence of the carry trade.
"That's a potential upside risk for the currency," she said.
Westpac currency strategist Michael Gordon said he expected the kiwi to trade around US70c for much of the first half of this year, then trend down to US65c by the year's end.
The market had already priced in a RBNZ interest rate rise and it was likely Bollard would not rule out another one later on.
The kiwi could move higher, but that would be driven by US dollar moves.
"If people start talking about the Fed cutting rates again, that could certainly take the US dollar lower."