GDP stats expected to underpin Kiwi dollar

Photo / Dean Purcell

The New Zealand dollar may extend its gains with first quarter gross domestic product figures out this morning expected to show the economic recovery has slowed down.

New Zealand's economy grew 0.6 per cent in the first three months this year, according to a Reuters survey.

The pace of the recovery slowed as the drought weighed on dairy output and the housing market was subdued.

Still, the data is expected to support the kiwi, which gained against the greenback after the Federal Open Market Committee was more downbeat about America's economic recovery and sapped demand for the world's reserve currency.

"GDP will be the game-changer - we're expecting 0.5 per cent growth, but if it goes a few points either way there should be a response" from currency markets, said David Bell, head of markets New Zealand at Commonwealth Bank of Australia.

"The kiwi touched on a key level, just above 71.61 US cents, and is looking to push on through the longer it stays there."

Traders will be keeping an eye on the Australian Labor Party's leadership vote this morning, after Deputy Prime Minister Julia Gillard challenged Kevin Rudd for the top job amid strong opposition to the proposed super-tax on mining.

The kiwi rose to 71.27 US cents from 70.85 cents yesterday, and gained to 68.42 on the trade-weighted index of major trading partners' currencies from 68.16. It was little changed at 64.04 yen from 64.02 yen yesterday, and advanced to 81.57 Australian cents from 81.27 cents.

It was up to 57.88 euro cents from 57.67 cents yesterday, and climbed to 47.66 pence from 47.50 pence. Bell said the currency may trade between 71.25 US cents and 71.50/72 cents today, with the GDP data and the Australian leadership coup likely to give the kiwi its direction.

New Zealand's current account deficit was smaller than forecast at 2.4 per cent of GDP, or an annual $4.46 billion, government data showed yesterday, helping underpin support for the kiwi in downbeat trading sessions in London and New York.