By Candice Zachariahs
Sept. 12 (Bloomberg) -- Investors should buy Australia's dollar against the New Zealand currency after central bankers in Wellington signaled they will cut interest rates further to prevent a prolonged recession, currency strategists said.
Traders are betting Governor Alan Bollard will reduce rates from 7.5 percent a further 1.28 percentage points over the next 12 months. They pared bets the Reserve Bank of Australia will cut its 7 percent benchmark in October after a report showed the economy added three times as many workers as forecast in August.
``It would be no surprise to see New Zealand and Australian policy rates converge over the next 6 to 12 months,'' Stephen Koukoulas, London-based head of global foreign exchange and fixed income strategy for TD Securities, wrote in a client note dated yesterday. ``This is not priced into the market.''
The Australian dollar rose for the second day today against the New Zealand currency, also known as the kiwi, trading at NZ$1.2290 per Aussie dollar as of 12:56 p.m. in Sydney, from NZ$1.2264 yesterday.
Koukoulas recommends investors buy the Australian dollar at NZ$1.2260 with a target of NZ$1.2600. Investors should exit the trade if the currency falls to NZ$1.2010.
Morgan Stanley and Commonwealth Bank of Australia both extended recommendations investors buy the Australian currency versus the kiwi. CBA has set a target for its trading strategy at NZ$1.3000.
RBC Capital Markets recommends betting the Australian dollar will rise to between NZ$1.28 and NZ$1.33, using call options that grant the right to buy the Australian dollar versus the New Zealand dollar.
Goldman Sees Kiwi Lower
Goldman Sachs Group Inc., the world's biggest securities firm, lowered its forecasts for the New Zealand dollar against the greenback for the coming months, citing the Reserve Bank of New Zealand's unexpected half-a-point rate cut and ``dovish'' statement this week.
``We now expect the bank to ease by 75 basis points this year, which is not discounted by the market,'' Goldman Sachs analysts including New York-based senior currency strategist Jens Nordvig wrote in a research note yesterday. ``This underpins our more bearish stance on the kiwi.''
The New Zealand dollar will weaken to 64 U.S. cents in 3 months and 60 cents in 12 months, compared with previous predictions of 68 cents and 61 cents, respectively, the Goldman Sachs analysts wrote.
New Zealand Recession
New Zealand is in its first recession since 1998, slashing retail sales and employment, central bank Governor Bollard said yesterday.
``We've got room to move,'' Bollard said in an interview from Wellington. ``We're in a loosening mode.''
Australian employers hired almost three times as many workers in August as economists forecast as demand for skilled labor in the mining sector increased, a government report showed yesterday.
Traders cut bets on the likelihood of a RBA rate cut in October from 80 percent yesterday to 67 percent today, a Credit Suisse Group index based on overnight swaps trading shows.
-- With reporting by Ron Harui in Singapore. Editors: Garfield Reynolds, Chris Young.
To contact the reporter on this story: Candice Zachariahs in Sydney at Czachariahs2@bloomberg.net
Posts
No comments:
Post a Comment