Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Yield attraction will continue to support the Kiwi

Yield attraction will continue to support the Kiwi.


By Garry Dean (Sales Trader, CMC Markets New Zealand)

The hawkish tone of last week’s RBNZ Monetary Policy Statement surprised a number of market analysts, and resulted in an explosive rally in the Kiwi to 0.8700. To varying degrees, most analysts were expecting the forecast track of the 90-day bank bill rate to reflect a decrease in the number of OCR increases going forward, but the bank’s profile remained largely unchanged from March. Much has been made of the collapse in dairy prices over the past four months, and with Governor Wheeler addressing the disparity between the elevated Kiwi and falling commodity prices in a speech in early May, there was a belief by some that he may pause rate hikes after June to take some heat out of the Kiwi. However, with immigration numbers surging, the Bank highlighted the pressures this is placing on sectors of the economy, and considered it appropriate for rates to move to a more neutral level. They did note that economic data going forward would be taken into consideration when assessing monetary conditions, and they even introduced a range of fan charts to simulate forecasts under different scenarios.

With interest rates globally at historic lows, it wasn’t surprising to see offshore retail investors in search of yield driving the Kiwi higher. A sharp increase in offshore retail investment has been seen in the Aussie recently, with the recent stimulus measures from the ECB fuelling the move even further, and this has flowed through to the Kiwi in turn. The medium-term risk for the currency remains to the topside, with resistance seen initially at 0.8745, before 0.8780 – the highs reached before the RBNZ threatened intervention on the 6th May. Support is seen on any short term retracement to 0.8645.

It’s hard to see just what will take the heat out of the Kiwi at present. News of escalating conflicts in Iraq and Ukraine have caused a spike in oil prices, and lifted gold prices, but there hasn’t been the normal risk aversion move in the Kiwi that would normally be associated with these increasing tensions. With central banks globally increasing their investments in equity markets, we have seen the US markets continue to consolidate just below all-time highs, with the VIX Index of Volatility remaining near historically low levels. The US FOMC meeting on Wednesday night is the key event for the week, with the market largely expecting a further $10 bio taper to the FED’s bond purchase programme. There has been a growing belief that some FOMC Members may be contemplating the prospect of bringing forward the timing of interest rate increases, and any confirmation of this would strengthen the USD, thus counteracting the strength of the Kiwi. Bank of England Governor Carney has indicated that rates there will likely increase sooner than the market had expected, and this has seen the GBP trade to near 5-year highs on Monday night. A move toward a less stimulatory monetary stance from these central banks would be an important step in limiting the rise of the Kiwi, but for the moment it remains well supported, and further upside is favoured.

ends

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

BusinessDesk: SkyCity Lifts Minimum Convention Centre Investment To $430M

SkyCity Entertainment Group, the casino operator, has lifted the minimum it will invest in the Auckland International Convention Centre to $430 million and said total costs including land may be $450 million to $470 million. More>>

Statistics: Drop In Dairy Prices Leads Fall In Exports

Total goods exports fell $240 million (5.5 percent) to $4.2 billion in April 2015 compared with April 2014, Statistics New Zealand said today. More>>

BusinessDesk: APN's NZME Sees Future In Paywalls, Growth In Digital Sales

APN News & Media has touted a single newsroom concept for its NZME unit in New Zealand, similar to what Germany's Die Welt uses, saying an 'integrated sales proposition' is helping it win market share, including ... More>>

Labour Party: Global Milk Prices Now Lowest In 6 Years

The latest fall in the global dairy price has brought it to the lowest level in six years and shows there must be meaningful action in tomorrow’s Budget to diversify the economy, says Labour’s Finance spokesperson Grant Robertson. “Dairy prices ... More>>

BusinessDesk: NZ Inflation Expectations Creep Higher In June Survey

May 19 (BusinessDesk) - New Zealand businesses lifted their expectations for inflation over the next two years, sapping any immediate pressure on the Reserve Bank to cut interest rates, and prompting the kiwi dollar to jump higher. More>>

BusinessDesk: Lower Fuel Costs Drive Down NZ Producer Input, Output Prices

May 19 - Producer input and output prices fell in the first quarter, mainly reflecting lower fuel costs and weakness in prices of meat and dairy products. More>>


Media: Fairfax Media NZ Announces Senior Editorial Team

Fairfax Media New Zealand has today confirmed its new editorial leadership team, as part of a transformation of its newsrooms aimed at enhancing local and national journalism across digital and print. More>>

Science: Flavonoids Reduce Cold And Cough Risk

Flavonoids reduce cold and cough risk Research from the University of Auckland shows eating flavonoids – found in green tea, apples, blueberries, cocoa, red wine and onions – can significantly reduce the risk of catching colds and coughs. The research, ... More>>

BusinessDesk: RBNZ House Alert Speech The Catalyst For Government Action

Prime Minister John Key all but conceded that pressure from the Reserve Bank of New Zealand for concerted action on rampant Auckland house prices was one of the main catalysts for the government's weekend announcements about tightly ... More>>

BusinessDesk: How To Fall Foul Of The New Housing Tax Rules: Tips From IRD

Just because you rented out your investment property doesn't absolve you from paying tax, says the Inland Revenue Department in a summary of commonly made mistakes by non-professional property investors when it comes to their tax liability.More>>

Legal: Superdiversity Law, Policy And Business Stocktake Announced

Mai Chen, Managing Partner at Chen Palmer New Zealand Public and Employment Law Specialists and Adjunct Professor of Law at the University of Auckland, today announced the establishment ... More>>

Housing: More House Price Gains Expected

House price expectations remain high, with a net 56% of respondents expecting house prices will increase. Fears of higher interest rates are fading, consistent with the RBNZ’s signals this year. Affordability and a lack of houses for ... More>>

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news