28 Sep 2009

Higher NZ dollar foreseen

8:43 am on 28 September 2009

While exporters hope the rise of the New Zealand dollar is over, one forecast has it strengthening to as much as 82 US cents next year.

Derek Rankin of Rankin Treasury says the United States currency will continue to weaken. He says high debt that built up in the United States over many years needs to change and Americans need to save.

The New Zealand dollar has strengthened 44% against the US dollar since March, and Mr Rankin says the recovering world economy and the need for food should underpin demand for the kiwi.

He also says long term interest rates are very attractive for investors.

But in the short term, Mr Rankin says October will be an interesting time for the US dollar as authorities look to pull back fiscal and monetary support, and the US corporate earnings season reveals how healthy these firms are.

He says that could see the New Zealand dollar fall to 68 US cents.

However, some economists expect the kiwi to fall to 60 US cents by the end of the next year as interest rates rise and dampen housing and consumers spending, while an increase in Government borrowing may see the supply of bonds outstrip demand.

At 8.15am on Monday, the New Zealand dollar was trading at

71.64 US cents, 82.38 Australian cents, 44.58 pence, 64.25 yen and 0.4869 euro. The Trade Weighted Index was 65.21.