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8 May 2009
Source: NZ Herald
- The New Zealand dollar spiked to a four-month high against the greenback around US59.90c, as it kept rising through the early part of the night after yesterday's boost from better-than-expected employment data.
After the peak around 1am the kiwi fell back to be at US59.10c by 8am, still up from the US58.85c at 5pm yesterday. The kiwi has lifted from US56.30c last Friday.
While figures published yesterday showed the unemployment rate rising to a six-year high of 5 percent in the March quarter, that was a smaller rise than economists forecast, suggesting to some that the Reserve Bank may not cut interest rates further.
ANZ bank said today that a test and break of the US60c level was a matter of time, in an environment where little demand for the US dollar meant that by default the NZ dollar rose.
"Whether local fundamentals warrant such a rise can be debated with the benefit of hindsight," ANZ said.
The NZ dollar also strengthened against the Japanese currency, rising to 58.52 yen at the local open from 57.87 at 5pm, but was little changed against the European currency, buying 0.4416 euro at 8am.
Against the Australian dollar the kiwi lifted to A78.43c from A78.10c at the local close. The trade weighted index was 57.97 at 8am from 57.66 at 5pm.
So that was a weekend of ulterior motive revelations then; it became
clear that the road pricing plan is designed to make more space for
Ministers who’s mileage increased by a fifth last year and the
reduction in Iraq troops curiously coincides with an expansion of
Afghanistan forces. And I am keen to find anyone who can tell me what I
am getting for the 100 percent rise in council tax over the last 10
years. It was also a weekend of rugby and football sporting highs and
lows; the highs - Italy’s performance and Ireland’s performance in the
6 Nations competition and the lows - England’s performance, Scotland’s
performance and John Terry’s knock-out.
As for the markets, the weekend was devoid of reasons to trade but
with the tension over whether the US is planning an attack on Iran and
concerns that Iran’s nuclear policy has “no brakes and no reverse gear”
which weakened the US Dollar. This week, despite being light on the
data front, could well be rather more busy on the volatility front. Key
events include US housing data, the Eurozone Purchasing Managers Index,
a couple of other US business and consumer confidence indices.
Elsewhere, the Japanese Yen is proving stubbornly weak and that is
having the greatest effect on the Euro and Australasian currencies
which are stronger than they might be.
There are other external factors working in the USD exchange rate
but that is covered below. So, if you can get past the Mirren, Scorsese
and ‘who wore what’ reports, I hope you have a great week and enjoy the
end of February and the appearance of lambs, daffodils and mad march
hares.
Amongst the external factors weighing on the US Dollar is a sizable
bloc building in the futures and options market around $1.32 on the
Euro-US Dollar exchange rate and that could well cap any USD weakness
this week. What this means is that any good news West of the Atlantic
is likely to create enough USD buying interest to strengthen the USD
against the Pound, Euro et al. Those surprise good news moments may
arrive on any one of the next four days with all the data mentioned
above plus US durable goods orders on Tuesday, economic growth (GDP)
figures on Wednesday and the Federal Reserve’s favourite inflation
indicator, the Personal Consumption and Expenditure index (PCE) on
Thursday. The scene certainly looks set for a lively week in the USD
related exchange rates and another little test up to $1.97 would not
surprise at all. However, traders will be wary of this kind of level
for all the reasons mentioned and another drop to test the upward trend
bottom at $1.95 is highly likely.
The trend which has been in place for 8 months on GBPEUR is still
intact in spite of the frantic downward movement we saw at the start of
last week. This drop in the exchange rate was a correction of the sharp
spike which followed January’s surprise Bank of England interest rate
hike and simply brought GBPEUR back into the same range it has occupied
since July 2006. There doesn’t appear to be any upward momentum in
GBPEUR but neither does there appear to be any appetite for a push
below €1.4800. We can therefore comfortably predict that any rise in
this exchange rate will find a whole heap of Euro buyers as it
approaches €1.4980 and so I have no real belief that €1.50 will be seen
any time soon. I can also predict that any major change in the
relationship between the Euro and US Dollar could well alter the scene
completely. USD strength would tend to favour the Euro more than the
Pound and that would drop GBPEUR back to the lower end of this range.
If I had to put a bet on the bets time to buy Euros, I would opt to act
before tomorrow’s US data.
A visitor at an asylum asks the director what the criteria are for
defining whether or not a patient should be institutionalised.
"Well,"
says the director, "we fill up a bathtub; then we offer a teaspoon, a
teacup and a bucket to the patient and ask him or her to empty the
bathtub."
"Oh, I understand," says the visitor. "A normal person would use the bucket as it's bigger than the spoon or the teacup."
"No," says the director. "A normal person would pull the plug. Do you want a bed by the wall or near the window?"
FX Research and Analysis undertaken by:
David Johnson - Halo Financial
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