KEY POINTS:
Financial markets will expect to see data this week showing an improvement in the current account deficit and strong economic growth over the first quarter, but neither the balance of payments nor the growth data is likely to soothe the Reserve Bank's currency-induced headache.
Westpac's survey of consumer confidence for the second quarter, due on Wednesday, and the National Bank's latest business confidence survey, due on Thurs-day, may turn negative, which could help to dampen speculative interest in the New Zealand dollar, but otherwise it's onward and upward for the kiwi.
The currency had the wind taken out of its sails when the Reserve Bank intervened to sell it early this month.
It has since risen to record post-float highs, despite a rumoured second intervention early last week.
Balance of payments data on Thursday is expected to show the current account deficit shrank to around 8.5 per cent of gross domestic product (GDP) in the year to March, down from 9 per cent in the 2006 calendar year. GDP data the following day is expected to show the economy grew by a robust 1 per cent over the March quarter.
Those factors combined are unlikely to affect the kiwi, even though a current account shortfall of 8.5 per cent is still high by international standards.
UBS New Zealand economist Robin Clements says ongoing problems in the current account are a "standing negative" but are unlikely to trouble the kiwi.
On GDP, he says the data is expected to be strong but it should not put much upward pressure on the currency.
Clements expects GDP growth to come in at 1 per cent for the March quarter and a current account shortfall equating to 8.7 per cent of GDP over the year to March.
Deutsche Bank NZ economist Darren Gibbs expects 1.2 per cent GDP growth over the quarter, above the market average.
"In principle, it should not be significant news, but the market tends to respond to GDP data. Nonetheless, if we do get a 1.2, as opposed to a 1, that will be a slight upside surprise, which will be kiwi-positive," he says.
Gibbs expects a current account deficit of 8.3 per cent, which is at the lower end of expectations.
The view on the trading room floor at Deutsche Bank is that the currency will continue to be well-supported.
National Party leader and former foreign exchange dealer John Key has talked of the kiwi hitting US$0.80 which Gibbs says is "certainly very possible".
The Reserve Bank itself expects a 0.8 per cent increase in GDP over the quarter but Westpac, like many other banks, expects a 1 per cent rise.
"A result on our expectations would add to the Reserve Bank's medium-term inflation worries," Westpac economists say.
The New Zealand dollar held a tight range around US$0.7630 on Friday as it was underpinned by a steady stream of buying from Japanese investors seeking high-yielding currencies.
There was no sign of intervention from the Reserve Bank.
