By ELLEN READ
The volatile kiwi dollar is having an unusual effect on high-street banks.
On Wednesday, Westpac had to update its customer exchange rates 10 times - a far cry from the usual one or two daily adjustments.
That day - the week's busiest - the kiwi fell below 66USc for the first time in six weeks. It ended local trading for the week at 66.78USc.
The kiwi has been under pressure during the past two weeks from renewed confidence in the United States economic outlook.
Although forecasts remain for it to go back up past 71USc, volatile weeks like the one just seen mean importers and exporters have to hold their nerve in terms of foreign exchange forward cover.
"With foreign exchange you can have well-reasoned views, but at the end of it nobody actually knows exactly what the exchange rate is going to do so risk management is very important for them," said Johnathan Bayley, Westpac's senior currency strategist.
"It's at the extremes of the exchange rate cycle that risk management is very important and we're at those extremes now."
Exporters might think that because the kiwi has fallen around 5USc in two weeks the cycle high has passed and so they might not be inclined to forward cover.
"That would be a mistake because there's still a compelling case for the US dollar to trade lower and we still feel the kiwi can achieve fresh highs - above the 71USc we've seen - before it hits its top," Bayley said.
Importers should also be wary as thoughts that the recent fall means the kiwi has seen its top might lead to them putting foreign exchange cover in place at present levels to avoid losing out further.
"That could be a mistake in retrospect, because if we're right then we're going to see fresh highs," Bayley said.
ASB's economist Kate Skinner said the week was another excessively volatile one for currency markets.
"There was no specific catalyst. Rather the moves were a result of technical levels, positioning and the expectation of a rise in US payrolls, which would lead to a rise in US interest rates."
The greenback strength saw most other currencies also lose ground through the week.
Skinner said that although the moves of the past week opened up the possibility for further kiwi weakness in the short term, another kiwi rally was likely in due course - "especially given that there has been little evidence to suggest the US current and fiscal account deficits have turned the corner".
The rally view is shared by others, with Citigroup's New Zealand economist Annette Beacher also doubting the current greenback strength is sustainable.
Her forecast is for the kiwi to rally back to 71USc this month and to peak at 76USc in 2006.
"The release of solid US data from purchasing managers - particularly showing increased employment ahead - has helped maintain upside for the US dollar.
"[But] while the data is encouraging, gains in the greenback have outrun the shift in fundamentals."
Volatile kiwi keeps bankers on move
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