Auckland Central, Auckland ( prfree.org ) June 13, 2013 - According to the latest ASB Kiwi Dollar Barometer, New Zealand businesses expect the NZD/USD to peak at around 85 cents in September.

ASB Chief Economist Nick Tuffley says, "The steady depreciation in the NZD/USD since the survey was taken in late April and early May means expectations for the currency may be lower had the survey been conducted later in May. We have recently revised down our forecasts for the NZD/USD, reflecting our expectations of a stronger USD."

Expectations the NZD is nearing its peak saw increased interest to hedge amongst importers. There was an increase in both the proportion of importers indicating they were planning to hedge, as well as the proportion of FX exposures that importers indicated they intended to hedge.

Larger businesses were more likely to use external advisors and consider them useful when making decisions on hedging. "There appears to be scope for small and medium-sized businesses to make more use of external advisors in the decision-making process. Of course, the feasibility of using external advisors will depend on the size of FX exposures relative to any added cost of that advice."

The Barometer finds businesses continue to see interest rate differentials as the key factor behind the strength in the NZD/USD. However, the perceived importance of quantitative easing by major central banks has surged over the past six months, and is now seen as the second most important driver amongst businesses surveyed.

"The substantial amount of stimulus injected by the Federal Reserve, Bank of England, European Central Bank and now the Bank of Japan has generally placed downward pressure on their currencies over the past year," concludes Mr Tuffley.

Key "take-outs" from the ASB Institutional Kiwi Dollar Barometer

The results from the Kiwi Dollar Barometer indicate businesses are generally expecting the NZD to peak soon. As a result, importers in the survey saw increased opportunity for hedging, in order to lock in a favourable exchange rate. Over Q2, there has been an increase in both the proportion of importers intending to hedge, as well as the proportion of FX exposures these importers planned to hedge.

The Kiwi Dollar Barometer again finds that larger businesses tend to report higher rates of success with hedging. This likely reflects the more extensive resources larger companies have for managing their business risk. Larger businesses also tend to make more use of external advisors, and are more likely to see them as playing an important role in decisions on hedging. The results suggest there is scope for smaller-sized businesses to make more use of external advisors.

For more info http://reports.asb.co.nz/report/article/16865/13452/0/businesses-see-the-nzd-peaking.html

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The Kiwi Dollar Barometer again finds that larger businesses tend to report higher rates of success with hedging. This likely reflects the more extensive resources larger companies have for managing their business risk. Larger businesses also tend to make more use of external advisors, and are more likely to see them as playing an important role in decisions on hedging. The results suggest there is scope for smaller-sized businesses to make more use of external advisors.