- ASB Chief Economist Nick Tuffley
The Kiwi slid further on Tuesday, extending its losses seen a week earlier, as the currency still remains vulnerable to the central bank's comments. Last week the currency lost 1.5% against the Buck closing at 0.8555 on Friday. Two days later the pair was already trading just 15 pips above the 0.85-mark. With the FOMC meeting on the radar there could be more potential losses for the Kiwi in case Wednesday's GDP report provides justification for Fed's hawkish comments.
While Graeme Wheeler claimed the strength of the Kiwi is not supported by macroeconomic data, the economy is expected to continue building up steam during the rest of the year. However, the latest ASB Quarterly Economic Forecasts showed that the growth will moderate to a more sustainable pace already in 2015. Economic growth is currently running above the trend, supported by a surge in construction activity as well as stronger demand across a broad range of sectors. However, the report also showed signs the economy is adjusting to higher interest rates are already emerging. Both business and consumer confidence posted losses, while falling commodity export prices, especially for dairy, was the main reason for softening the tone of recent economic developments. Nevertheless, the Kiwi remains high by historic standards, as yield demand for the currency remains strong.
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