22 Jun 2009

Dollar may hit 70 US cents - analyst

9:54 am on 22 June 2009

The New Zealand dollar could soon reach 70 US cents, a currency analyst is warning.

In what would be bad news for exporters, Derek Rankin of Rankin Treasury says the dollar will inevitably appreciate as the United states dollar continues to weaken against other currencies.

Mr Rankin says exporters using US dollars will suffer, but manufacturers exporting to Australia are benefiting from a falling New Zealand dollar against its Australian counterpart.

Mr Rankin says the Reserve Bank has in effect stopped easing New Zealand interest rates and there is no longer the threat of an economic downgrade, so the dollar is likely to reach 65 US cents in the immediate future, and 70 US cents by the end of the year.

But an analyst at TD Securities, Annette Beacher, believes the New Zealand dollar will soon head down, not up.

Ms Beacher says all the economic indicators point to the currency falling, and she maintains that many analysts are surprised that it has not dropped to 60 US cents already.

She says New Zealand has been in recession for a lot longer, the Consumer Price Index is heading towards zero, interest rates are at record lows for New Zealand and the commodity price boom is over.

All these factors indicate that the dollar should underperform, but it is not happening yet, she says.