The New Zealand dollar may fall this week in the face of a resurgent greenback and as dairy futures suggest prices will decline at this week's GlobalDairyTrade auction, raising concern about the outlook for the country's largest export commodity.
The kiwi may trade between 73.85 US cents and 77 cents this week, according to a BusinessDesk survey of 13 currency advisers and strategists. Seven expect the currency to decline, two bet it will rise, while four say it will remain little changed. It recently traded at 74.89 US cents.
The US dollar index, which measures the greenback against a basket of currencies, has gained since the Federal Open Market Committee on April 8 released the minutes to its March meeting, showing several members favoured raising interest rates as early as June. Locally, concern is building that dairy prices will fall at the GDT auction this Thursday as Fonterra Cooperative Group offers more product volume amid weaker demand, with whole milk powder futures suggesting a 5 percent decline for the current contract.
"There's been a clear break on the US dollar index which has been continuing higher - that has led to an overall US dollar resurgence at the end of last week which I think is going to continue into this week," said Stuart Ive, senior dealer, foreign exchange, at OMF. "The pressures for the kiwi are to the downside from US dollar strength and the GDT auction on Thursday morning which is unlikely to be beneficial to the kiwi."
Auckland-based Fonterra, the world's largest dairy exporter, last week said it would offer 9.5 percent more whole milk powder at this week's auction over contracts for delivery between June and October. New Zealand is the world's largest supplier of whole milk powder.
Fonterra will offer 5,365 metric tonnes of whole milk powder this week for the current contract known as Contract 2, which covers product with a June shipping date, 8 percent more than it offered at the last auction a fortnight ago. It will also offer more butter, cheddar, rennet casein and skim milk powder for the current contract.
Whole milk powder futures for June delivery last traded at US$2,390 a tonne, suggesting the price will decline 5 percent, according to OMF financial markets director Nigel Brunel.
Elsewhere this week, traders will be eyeing Chinese data releases for a gauge on how New Zealand's largest trading partner is tracking. China publishes its March trade balance today, with first quarter GDP on Wednesday as well as March retail sales, industrial production and fixed asset investment.
Tomorrow, the New Zealand Institute of Economic Research publishes its quarterly survey of business opinion and the Real Estate Institute of New Zealand is expected to release its latest monthly housing data for March.
Meanwhile, Prime Minister John Key is slated to preview the upcoming budget at a BusinessNZ speech at Te Papa.
On Wednesday, Statistics New Zealand publishes the food price index for March and Reserve Bank deputy governor Grant Spencer will give a speech about housing to the Rotorua Chamber of Commerce.
On Thursday, the BNZ-BusinessNZ performance of manufacturing index for March is released along with the ANZ-Roy Morgan consumer confidence survey for April.
Australia has business and consumer confidence surveys this week, alongside inflation expectations and March employment data.
The US will publish March data for retail sales, industrial production, housing starts and inflation this week while the European Central Bank releases its latest policy decision on Wednesday.