WELLINGTON: The New Zealand dollar is heading for a 1.4 per cent fall on a trade-weighted basis this week after the Reserve Bank’s acceptance that it may have to cut rates and Fonterra Co-operative Group’s downgraded forecast for the farmgate payout this season eroded investors’ appetite for the kiwi.
The trade-weighted index fell to 71.05 at 5pm yesterday from 72.08 last week, driven largely by a decline in the kiwi/Australian dollar cross-rate. The local currency was more muted against the greenback, heading for a 0.3 per cent decline to US64.70c from US64.90c in New York last week. It traded at US64.69c at 8am yesterday and US64.44c on Thursday.
Nine currency advisers surveyed by BusinessDesk predicted the kiwi would trade between US63.50c and US66.80c this week, with four expecting a gain, four picking a decline and one betting it would be little changed.
Reserve Bank governor Graeme Wheeler kept the official cash rate at 2.5 per cent on Thursday, while saying further reductions might be needed with inflation set to take longer to return to the bank’s target range of 1-3 per cent. Before the OCR review, Fonterra cut its forecast payout by 45c to $4.15 per kilogram of milk solids as global oversupply continues to depress dairy prices.
“The Reserve Bank opened the door for rate cuts, talking about they’d like the kiwi weaker, while Fonterra lowered its payout for the 2015-16 season — that’s all negative for the kiwi,” said Michael Johnston, senior dealer at HiFX in Auckland. “The kiwi’s certainly fallen sharply against the Aussie and there’s not many reasons to be buying kiwi at the moment.”
