Banking News

Kiwi businesses expect dollar to weaken

Kiwi businesses expect dollar to weaken

(15 June 2017 – New Zealand) In the latest ASB Kiwi Dollar Barometer, economists at the New Zealand based bank expect the dollar to be trading at about 74 cents against the US Dollar (USD) during the next year as the Trump presidency continues to cause uncertainty and leaves a weaker greenback.

ASB chief economist Nick Tuffley said forecasts had changed considerably since the last round in March, with the Kiwi Dollar now expected to gain against the USD over the next year.

However, exporters and importers expect a fall in the kiwi - but they were interviewed before the latest political ructions in Washington.

''When we had Donald Trump get elected with a hiss and a roar and come flying into the White House in January he was looking all 'Thunderbirds Are Go' for taking action,'' said Tuffley.

''But . . . things in the US things are getting very bogged down and we've had quite a rethink on how quickly Donald Trump will get any fiscal package through - we think it's a long time off.''

The Barometer also inquired about the extent to which businesses use external support for foreign exchange hedging and trade recommendations, and in writing and monitoring treasury policy.

The latest round found larger firms are more likely to seek outside support: with 99.2 percent of firms with more than NZD$150 million revenue range engage outside assistance, compared with just 77.8 percent of firms in the NZD$1 - $30 million range.

"Larger firms are more likely to pay for detailed, firm-specific assistance, perhaps reflecting the more complex nature or magnitude of their FX transactions," Tuffley said.

Banks are the main overall source of external foreign exchange support across respondents, followed by accountants and treasury advisory firms.

Tuffley said it was encouraging more businesses were hedging against currency fluctuations.

''The key thing with currency outlooks is not running a business off what you think a currency will do but making sure you have thought about having adequate protection in case the currency does something that you would not want.''

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