12 Dec 2016

Importers more positive than exporters on outlook for the kiwi

9:15 am on 12 December 2016

The New Zealand dollar is expected to remain steady over the coming year although policies of US President-elect, Donald Trump, could prove to be a wild card.

New Zealand money

Photo: 123rf

The ASB Kiwi Dollar Barometer survey of businesses involved in international trade showed most expect the kiwi to hover just below 70 US cents, little changed from the August survey at 69 US cents.

However, companies with sales turnover of more than $150 million expected to have a greater exposure to foreign exchange next year, which could point to pent-up demand for hedging in the near future.

ASB chief economist Nick Tuffley said the New Zealand dollar had been elevated for some time, which had benefited importers, while exporters may have been feeling the pinch.

While 60 percent of businesses think the kiwi was more than 10 percent unfavourable to their budgets, exporters and importers had different ideas on how to manage volatility.

Business were asked what actions they would take if the exchange rate moved against them.

While half of importers would look to change prices, just 6 percent of exporters would attempt to do the same.

In contrast, 43 percent of exporters would try to lift their sales volumes.

"This may be because exporters may face greater global pressures, particularly in price-taking sectors," Mr Tuffley said.

Fewer than 20 percent of firms would choose to absorb the impact through a reduction in profits.

Importers were more upbeat than exporters on the currency's prospects in the year ahead, expecting some appreciation against the US dollar.

However, Mr Tuffley said the survey was completed before the election of Donald Trump to be president of the United States, and his policies could affect currency levels.

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