NZ firms to gain from aussie dollar surge

New Zealand tourism businesses and manufacturers that export to Australia are expected to be the winners from a strengthening Australian dollar that could be on par with the greenback by the end of the year.

Australia's currency was yesterday trading at US96.77c after gaining 8.6 per cent this month and 15 per cent since June.

Westpac senior market strategist Imre Speizer said the aussie dollar was being driven by its economy and the strong likelihood of an increase in its central bank rate.

The Reserve Bank of Australia is due to review the rate on Tuesday.

The bank had been in a holding mode but now its commodity boom had moved into its next phase and inflation was becoming a concern again, there was a strong belief the rate would be lifted, Speizer said.

"There is a good chance they will hike the rate by 0.25 basis points. The market is forward looking and will have taken that into account now."

Speizer said it was possible the aussie could reach parity with the US dollar by the end of the year but he didn't believe it would happen in the next few weeks.

"It is getting stretched for technical reasons - it's over-bought. I certainly don't see it making parity in the next few weeks but it could happen by the end of the year."

Speizer said New Zealand typically followed the Australian dollar against the US.

"We tend to ride on their coat-tails to some extent."

But New Zealand's weaker economy and higher interest rates had opened up a gap between the New Zealand and Australian currencies which was good news for Kiwi exporters.

The New Zealand dollar was trading as high at A82.51c on July 15 but has fallen more than 5c in the past 2 months. Yesterday it was trading at A76.33c.

Speizer said New Zealand exported a lot of whiteware to Australia, which was also New Zealand's largest market for tourists.

"Those things will get a positive spin-off," he said.

ANZ National Bank senior economist Cameron Bagrie said it would be "money for jam" for tourism businesses.

"You just have to go to Queenstown - it's had a bumper ski season."

But the New Zealand dollar's strength against the US dollar would make it tougher for exporters to America and any countries where New Zealand traded using the greenback, including the Middle East, China and other parts of Asia.

"The downside is we are riding in the kangaroo's pouch," said Bagrie.

It was not all bad news.

"The export sector is struggling on one hand because of the US/NZD but it's not that bad because of commodity prices being strong."

The US had also become less of an important export market with the rise of China.

"China has overtaken the US in imports from New Zealand. Yes, a high US/NZD does hurt but it's not the end of the world."

Bagrie said he expected the New Zealand dollar to continue to trade higher than its fair valuation but there wasn't a clear trend in currency markets overall.

People were making decisions based on risk and when the risk appetite was up the Australasian currencies benefited.

Investors were also attracted to countries with links to the new world growth areas like China. "I think the New Zealand dollar is going to run above fair value for a while yet."