The New Zealand dollar will be impacted by a number of events this week, with central bank meetings in Australia tomorrow and also Europe, Federal Reserve officials including Janet Yellen giving speeches and the last US payroll report before the Fed's December interest rate review where it is anticipated to be raised, according to BusinessDesk.
The New Zealand dollar started the week lower after the US dollar advanced towards the end of last week amid low liquidity with many traders on holiday.
"The less that is said about Friday’s trading, the better. Most of the US market looked to have made the sensible decision of bridging Thursday’s Thanksgiving holiday and the weekend. With thin liquidity, there’s little to gain trying to make rhyme or reason of broader market moves," Bank of New Zealand currency strategist Raiko Shareef said in a note.
"After last week’s doldrums, this week’s agenda will come as a shock to the system. There are an excessive number of top-tier data releases and policy events due."
The kiwi slipped to 65.27 US cents at 8am in Wellington, from 65.30 cents at the New York close and 65.69 cents at 5pm on Friday. The trade-weighted index was at 71.22 from 71.49 on Friday.
Shareef predicts the kiwi dollar could trade below 65 US cents this week and may even break below 64 cents.
Across the ditch: Historically low Aussie rates to become the norm veteran adviser says
An Australian mortgage veteran told NZ Adviser's sister title that in the current low interest rate environment, borrowers will be highly sensitive to future rate rises.
1300HomeLoan managing director John Kolenda says interest rates will likely remain around historical lows for the next decade due the continuing impact of the global finance crisis (GFC) which has changed consumer behaviour.
“Variable interest rates over the last 50 or more years have averaged around mid to high 7% range, but for the next decade we will see a much lower average variable rate,” he told Australian Broker.
“Considering the recent hikes in rates made by many of the lenders we would have seen variable rate averages of around the mid to high 4% range. The new norm of the future will see variable rates stay below 7% with an average far less than the historical past.
“The GFC has changed society and consumers are generally more sensitive to economic conditions and what is happening with interest rates. Post GFC we have seen a dramatic change in consumer behaviour as they prefer to save money and spend wisely versus the credit spending frenzy for the decade before the GFC.”
Kolenda says the Reserve Bank of Australia (RBA) will have to “tread carefully” with the cash rate meeting tomorrow or risk a sharp reaction from consumers.