LNG-related forex inflows may boost kina

THERE is possibility that foreign exchange inflows in preparation for the liquefied natural gas (LNG) project with regular mineral revenue inflows may support and lift the kina.
The kina-US dollar rate may remain flat this week and may decline mildly in the coming weeks, but as to when exactly, the mild decline to be seen remained uncertain, according to ANZ’s Weekly Update.
In the last two weeks, the kina found some support and remained constant against after having depreciated by about 3.2% in the interbank market since mid-July.
Previous trends showed some evidence that the local currency would remain constant for some time over this period before further decline unfolds on preparation for the festive season and slow US dollar inflows.
The Aussie dollar-US dollar rate hit a peak above 0.8750 last week.
After a rapid move, buyers of the Aussie dollar and US dollar may now take advantage of any profit-taking, which could prompt the A$ to decline against the greenback to US$0.8660 and further towards US$0.8550.
ANZ said the direction of Australian currency this week was expected to be provided by external data, with US Fed reserve meeting key focus.
A sluggish US economy, low interest rates and a rapid expansion of the monetary base would continue to encourage capital outflow in US and will continue to exert a downward pressure on US dollar.
Aussie dollar to gain more strength in the near future and could see A$-US$ rally to US$0.92 in first quarter next year.
The two units may remain elevated in the high US$0.80s to low US$0.90s range over 2010.