BNZ sees kiwi above US85c

Last updated 05:00 07/11/2012

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The kiwi dollar could break through 85c in the next few weeks, says Bank of New Zealand chief economist Tony Alexander.

Recent better-than-expected global economic data was likely to magnify upward pressure on the New Zealand dollar, he said.

Though not suggesting a positive world growth picture because "some very, very big problems remain", Alexander said currency investors would be feeling slightly less worried, though cautious, and would be willing to buy riskier assets such as the kiwi.

It was reasonable to expect some additional increases in commodity prices, which would help offset the negative impact on farm incomes of a probable rise in the dollar above 85c in the next few weeks, he said.

But ANZ chief economist Cameron Bagrie believed there was just as much chance of the kiwi falling to 80c if there was a flare-up in the poor European economic situation.

Waikato Employers and Manufacturers Association chairman Jack Niness said the movement of the dollar was a "guessing game" for the region's exporters.

It was also a game of swings and roundabouts because a strong dollar meant their raw materials were cheaper.

"But it's certainly a short-term pain in terms of impact on their business."

He urged importers benefiting from the dollar to pass the savings on to their exporter customers.

Many Waikato exporters would have hedged against the rise of the kiwi but they also had to gauge their level of risk carefully, he said.

"If the dollar goes down and they've hedged high that is a risk to the business."

Exporters had now been living with a volatile exchange rate for some years, but had to manage the risk with advice from their financiers and currency professionals.

Alexander believes the kiwi will move upwards in the next five or so years.

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