Manufacturers are unlikely to see any short-term respite from the high Kiwi dollar - which hit a fresh post-1985 float high of US78.35 cents early yesterday. Some economists and currency experts are picking the currency to stay around current levels till at least the end of the calendar year.
Westpac is among those that have raised forecasts for the New Zealand dollar, which closed at 78.12, now picking it to reach US79c by year's end. "That's a fairly decent revision from our last track, which was around US74c," Westpac currency strategist Michael Gordon said.
High dairy prices were helping farmers and could bolster the economy "in the order of 1 per cent to 1.5 per cent of gdp" growth. The Kiwi has also gained ground against the Australian dollar - after weak retail spending data across the Tasman yesterday pointed to Reserve Bank of Australia rates being kept on hold.
The Kiwi finished at A91.2c yesterday. With this country's Reserve Bank having increased the official cash rate to 8 per cent early in June, New Zealand has the highest interest rates in the industrialised world. The Kiwi continues to attract the "carry trade", particularly from Japanese switching out of yen into the Kiwi to get higher returns.
BNZ chief economist Tony Alexander said there was little sign of a pullback in economic growth that would allow the Reserve Bank to start an easing cycle. The currency was headed toward US80c. Only a negative economic event such as a downturn in immigration or pressure on house prices would cause the dollar to fall. He said that while some sectors of the economy were hurting, the "cries of pain" from manufacturers had not been as shrill as in the past when the Kiwi had been at lower levels. Manufacturers were investing in plant, building and information technology to boost productivity, Mr Alexander said. "They're able to handle the higher currency better."
But Canterbury Manufacturers Association chief executive John Walley said foreign-owned companies such as GL Bowron, and textile manufacturer Gale Pacific, were at the forefront of decisions to restructure and move overseas. "What that's saying is that the (firms) with no sentiment are upping stakes ... these offshore-owned companies are a bit like the canary down the coalmine."
In February, Charles Levin, an independent currency trader and adviser to exporters, predicted the Kiwi would be trading as high as US80c at a time when manufacturers were saying anywhere above US70c was too high. The Reserve Bank could best work to help exporters by making the Kiwi less attractive to currency traders, he said.
