Opinion: NZ dollar steady as Eurokiwi maturities pass without pain

By Danica Hampton The currency markets saw out the week with risk appetite still evident, after a sharp but short lived tumble when news initially broke of the terrorist activity in Jakarta on Friday. The New Zealand Dollar spent Friday evening trading between 0.6425 and 0.6475 against the greenback as the week came to a subdued close. Though the improved investor appetite for high yield bonds and diversification into emerging markets that had been evident all week continued across most asset classes and markets. Equity markets across the globe for the most part chipped out small gains, to encourage the optimism that dominated market sentiment last week. US housing numbers were also viewed as positive, while talk of a bank sponsored rescue for CIT helped the mood.

It's potentially another quiet week ahead on the NZ calendar. In line with the broader backdrop of stabilisation in the New Zealand economy we're observing, today's service sector index could hold May's unadjusted bounce, but we suspect it will struggle to push above the 50-level that marks expansion. On Tuesday June's net migration result looks likely to be another strong one, mostly courtesy of New Zealanders choosing to stay put. As for short-term arrivals, we expect they will reflect a surge in visits from Australia but significant weakness from longer-haul tourist markets. Monthly credit card billings have been as volatile as ever of late, but we suspect the trend will continue to look a little better than flat, they are also slated for a Tuesday release. So we start this week, again considering resistance of some importance at the 0.6525/0.6550 level ahead of early June highs towards US 66 cents. Immediate support in the short term exists at the recently tested 0.6400/0.6425 level ahead of the 0.6325/0.6350 level. Over the past week a number of fresh Uridashi and Eurokiwi issues have been noted on the wires, we'll watch for further developments in these markets as we eye the end of month concentration of maturities. Of course, after the minimal disruption caused by last week's concentration of Eurokiwi maturities, it seems the majority of investors are happy to maintain at least some of their exposure to New Zealand at this stage. Once again, earnings reports will be a feature of the coming week, with around 25% of the S&P still to report. This includes a broad mix of banking, industrial and IT names. In a relatively quiet week ahead for US data the focus is likely to be on Fed Chairman Bernanke's Monetary Policy Report & Testimony before Congress on Tuesday & Wednesday. There are also aspects of the US housing market in data releases later in the week. Across in Europe there is Eurozone Current Account and Industrial Orders data as well as PMI surveys as the markets' and analysts' key focus. German IFO rounds out the week with a Friday release date. The UK has a busy week of second quarter GDP, retail and house price data and BOE minutes from their July meeting to savour. In Australia the CPI release on Wednesday will be the main event, though the Tuesday release of RBA Board minutes from their July meeting will also be monitored. After a holiday in Tokyo to start the week there are BOJ minutes, trade data and industrial activity numbers. China's calendar of releases looks bare after a hectic few days last week. * Danica Hampton is BNZ's Currency Strategist. All of the research produced by the BNZ Capital team of economists is available here.