Businesses expect the NZD to peak

Wednesday, 12 June 2013, 12:35 pm
Press Release: ASB Bank

Businesses expect the NZD to peak

• Businesses expect the NZD/USD to peak in September this year.
• Growing interest in hedging from importers.
• Quantitative easing seen as a growing influence on the NZD.

According to the latest ASB Kiwi Dollar Barometer, New Zealand businesses expect the NZD/USD to peak at around 85 cents in September.

ASB Chief Economist Nick Tuffley says, “The steady depreciation in the NZD/USD since the survey was taken in late April and early May means expectations for the currency may be lower had the survey been conducted later in May. We have recently revised down our forecasts for the NZD/USD, reflecting our expectations of a stronger USD.”

Expectations the NZD is nearing its peak saw increased interest to hedge amongst importers. There was an increase in both the proportion of importers indicating they were planning to hedge, as well as the proportion of FX exposures that importers indicated they intended to hedge.

Larger businesses were more likely to use external advisors and consider them useful when making decisions on hedging. “There appears to be scope for small and medium-sized businesses to make more use of external advisors in the decision-making process. Of course, the feasibility of using external advisors will depend on the size of FX exposures relative to any added cost of that advice.”

The Barometer finds businesses continue to see interest rate differentials as the key factor behind the strength in the NZD/USD. However, the perceived importance of quantitative easing by major central banks has surged over the past six months, and is now seen as the second most important driver amongst businesses surveyed.

“The substantial amount of stimulus injected by the Federal Reserve, Bank of England, European Central Bank and now the Bank of Japan has generally placed downward pressure on their currencies over the past year,” concludes Mr Tuffley.

ENDS

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