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Momentum in the New Zealand dollar is set to cost exporters dearly in the year ahead, with indications of more strengthening against the currencies of trading partners.
The waning Australian economy, decisions by the United States central bank the Federal Reserve and domestic inflation concerns are conspiring to strengthen the kiwi - all underpinning its attraction as a target for overseas investors.
Since early November the kiwi has risen against the Australian from A87c to A93.51c yesterday, the US dollar from US82.5c to US83.81c, although only slightly against the Chinese yuan, from 5.03 to 5.06 yesterday.
Craigs Investment Partners broker Peter McIntyre highlighted the imminent renewal of forward cover foreign currency contracts would be yet another cost to be borne by companies, especially given the large gain against the Australian dollar.
''It's likely many would have contracts covering about A85c, but renewals at more than A90c is also going to be a lot more expensive,'' he said.
Craigs predict the kiwi will go through A95c some time during the present quarter.
As if to underline the growing problem, a recent currency review by Craigs prompted Fletcher Building to be singled out for a slight profit downgrade yesterday.
Its forecast after-tax profits were pushed down 0.6% for full-year 2014 and 1% down for full-year 2015, Craigs having changed its outlook on the Australian dollar average from A88.3c up to A90c this year, and to A91.6c during 2015.
Mr McIntyre said ''timing will be crucial'' for New Zealand's Reserve Bank governor, Graeme Wheeler, on when to raise the interest-driving official cash rate (OCR), to counterbalance looming inflation pressures.
While most analysts are picking an OCR rise in March or April, Mr McIntyre said that timing could possibly be pushed out to June, while Mr Wheeler considered the performance of the Australian economy and its cash rate, and any change to the Federal Reserve's 0% cash rate.
''Australia's economy is sluggish at the moment and its Reserve Bank is likely to cut the cash rate from 2.5%, which makes New Zealand more attractive [to investors],'' Mr Mcintyre said.
Forsyth Barr broker Andrew Rooney said with the kiwi up 15.87% against the Australian dollar last year, 2013 was ''disappointing'' for New Zealand investors.
While not picking a reversal in the kiwi's strengthening trend in the short term, the present levels would be ''less of a headwind'' for New Zealand investors this year.
Mr Rooney noted that while both countries' cash rates stood at 2.5%, the bias was for ''markedly higher'' rates in New Zealand during the next one to two years, while in Australia the rate likely would be stable.