Businesses expecting NZD/USD to peak in September
(13 June 2013 – New Zealand) For the June ASB Kiwi Dollar Barometer, East & Partners interviewed businesses turning over at least NZ$1 million (A$835,000) a year, finding the majority expects the NZD/USD to peak at around 85 cents in September.
ASB Chief Economist Nick Tuffley said 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 found 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," concluded Tuffley.
East & Partners interviewed 378 New Zealand businesses, asking a range of questions about their exposure to and views about the NZD.
The Barometer tracks exporters’ and importers’ exposures to foreign exchange risk, while surveying expectations for hedging plans and managing foreign risk.
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