New Zealand-Exports forecast.

NEW ZEALAND.

Export outlook positive

A positive currency outlook for farm product exporters should continue for the rest of this year, says Westpac Bank strategist Imre Speizer.

He expects the kiwi dollar to continue weakening against the major currencies, and says that most of the commodity price falls should be over. In New Zealand dollar terms, the milk powder price has bounced since January.

Among the major banks, Westpac has made a call for the Reserve Bank to make an aggressive 100 basis point cut in the Official Cash Rate (OCR) this Thursday, down to 2..5%. If this happens, expect a further fall in the dollar as the NZ interest rate premium declines. Speizer says a 50 point cut will already be priced in so will not on its own move the currency lower.

He expects the dollar to trade down to US$0.47 over the next three months or so (from US$0.4973 late on Friday morning), though the path will be volatile and there is even a possibility of a short term rebound above 0.50 before then.

The other major crosses are being battered at the moment as well from the effects of the credit crisis, but Speizer says the downward trend of the kiwi will continue.

He expects the dollar to go as low as Y42 this year from Friday’s level of Y48.70, even though, as with the greenback, it could go slightly higher first.

The Bank of England (BOE) and the European Central Bank (ECB) both cut their cash rates late last week, and the BOE officially launched its quantitative easing (printing money) phase.

Speizer says that will weaken sterling over the longer term, but this year the kiwi will weaken by more, with a call to stg0.33 as a low, compared to Friday’s stg0.3522.

He says the ECB is also likely to go down the quantitative easing path this year. "Calling the euro is uncharted territory for the kiwi, but on a nominal educated guess I’d call it at E0.35 at some stage.’’

This is down from Friday’s level of E0.3966.