Kiwi fares well in global currency wars

Kiwi fares well in global currency wars

By Andrew May (Sales Trader, CMC Markets New Zealand)

As the G7 summit rambles into motion this week, the universal concern will be devaluing currencies (the yen in particular) and how best to jump start their economies out of deflationary cycles without severely overvaluing cross pairs of majors and minors.

The New Zealand Dollar has so far weathered this bias with a fairly neutral stance approaching its highest post float high ever. The NZD/USD has not waned too much under US83c for the year to date, currently treading 84c on this mornings open just off overnight highs of 84.30.

As the AUD/USD chops up to a 200pt range to trade just over 1.03 the NZD/AUD is seeing a resurgence trading at highs not seen since July 2010 and currently at 81.50.

Expect a further push to the upside for the NZD/AUD cross to touch 82.30, having comfortably set a support above 80.80. This could be further exacerbated as traders lock in profits against an extinguished Aussie dollar and markets continue to find the Australian economy somewhat jittery with its economic growth concerns.

However, with Chinese New Year in full swing and Asian trading virtually at a halt, there shouldn't be much liquidity flowing through the antipodean crosses. Instead we'll await a collaborated response from the Moscow G20 summit prompted largely by Japan's new Government pressing for aggressive expansion of monetary policy, which has seen the yen weaken sharply and exports increase as a result.

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