The New Zealand dollar looks likely to fall this week as investors consider how local inflation and housing figures will feed into the Reserve Bank's interest rate outlook, ahead of next week's policy review.
The local currency may trade between 81.20 US cents and 84.20 cents this week, according to a BusinessDesk survey of six traders and strategists. Four predict the kiwi will fall this week, while one expects it to gain and one sees it largely unchanged. It recently traded at 82.50 US cents from 82.62 cents at the New York close on Friday.
New Zealand's consumers price index is forecast to have fallen 0.1 per cent in the final three months of 2013, for an annual rate of 1.5 per cent, according to a Reuters survey of 11 economists. Local housing sales figures are also in focus as investors gauge the impact of Reserve Bank-imposed restrictions on the level of low equity home lending.
A benign inflation figure and slowing property market may spur investors to push out their expectations for an interest rate hike by the Reserve Bank, which has signalled tighter monetary policy this year. Traders have priced in 110 basis points over increases to the official cash rate over the coming 12 months, according to the Overnight Index Swap curve.
"We might see a slowdown in house sales and weak headline quarterly CPI numbers against the backdrop of a broadly rising US dollar," said Imre Speizer, market strategist at Westpac Banking Corp in Auckland. "It would be an environment to see kiwi/US dollar selling."
