New Zealand-The dollar and exports.

NEW ZEALAND-THE VALUE OF THE DOLLAR.

Global sentiment still dictates the level of the New Zealand dollar but some domestic influence could come from an interest rate call by the Reserve Bank on Thursday and labour market data next week.

As it has for the last several weeks, the currency rose and fell last week on investors’ risk appetite, reflected mainly by moves on the United States stock market.

The trend has been significantly higher, though ANZ-National Bank group senior economist Khoon Goh said sentiment is fragile and the roller-coaster ride will continue.

The dollar rose slightly overnight last Thursday, from US$0.5547 to 0.5612 early Friday morning, but remained off its recent highs. It was at E0.4266, stg0.3809 and Y54.92, off the recent highs as well for all of those.

The ANZ-National believes the market has factored in a 50 basis point (bp) cut in the Official Cash Rate (OCR) this week into the currency. "We think the Reserve Bank will also signal that rates will be lower for longer,’’ said Goh. "There may be some initial impact on the dollar, but again the main influence will from offshore.’’

He said there was more potential market impact from the labour data due out on May 7. "We’re hearing some nasty anecdotes about rising unemployment, and those figure could focus the market’s mind and the dollar could come off again.’’

The ANZ-National view is that the kiwi dollar will move lower over the course of the year, and again break below the US$0.50 level, possibly to about 0.48. A significant retracing lower against the yen is also expected, to round the Y47.00 mark.

Reasonable falls are also expected against sterling and the euro. Goh forecasts the dollar being at stg0.34 and at E0.40 later in the year.