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

 


Kiwi consolidates above major support as tensions ease


Kiwi consolidates above major support as geopolitical tensions ease.

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


The Kiwi has been hit hard by a combination of factors, with last week’s 8.4% fall at the fortnightly GlobalDairyTrade auction now taking the total fall since February to a staggering 40%. Having already cut the 2015 season forecast price from $7.00 to $6.00, the risk is increasing that this level may need to be cut further, and this would potentially wipe more than 2% off the GDP rate. Kiwi has also faced strong headwinds from a strengthening US Dollar, with the US Dollar index trading last week to highs not seen in almost a year, as the market assessment of rate hikes from the Fed are crept forward.

The perception of a hold in the rate hike cycle from the RBNZ until the first quarter of 2015 has analysts reassessing the potential for the OCR to increase to 4.50% by the end of 2015, and this is posing questions for carry-trade investors. The decline in NZD/JPY from recent highs near 90.00 to 86.50 currently is significant, but from a technical perspective we trade currently right on the 200-day moving average. More importantly, the 50-week moving average sits at 85.60, and this hasn’t been breached in almost two years. A break below this level would very likely encourage a liquidation of speculative carry-trade positions.

The NZD/USD has fallen close to 5% in just over a month, and is consolidating at present within a range of 0.8425 – 0.8500. The 50-week moving average at 0.8425 is providing major support, and it was interesting to see the currency close above this level on Friday, following the selloff in risk assets after news of US airstrikes in Iraq. Geopolitical risks remain a key factor in assessing risk appetite at present, and the weekend’s news of Russian troop withdrawals from the Ukraine border has encouraged a return to risk assets, with equity markets posting solid gains to start the week. We have seen over the past few months how unpredictable Russian President Putin can be however, and renewed speculation of a Russian ‘humanitarian’ convoy of supplies to pro-Russian insurgents in Donetsk has the potential to escalate tensions in the region.

Last week’s Q2 unemployment data saw a drop in the unemployment rate to 5.6%, with labour costs rising at their highest level in a year – something the RBNZ will continue to watch with interest. The jump in Australia’s July unemployment rate to 6.3% means for the first time since March 2009 our unemployment rate is below Australia’s. There are some concerns being raised across the Tasman, with the RBA last week revising lower their inflation and GDP forecasts, and this has kept downward pressure on the Aussie. This should be positive for the NZD/AUD cross rate, with a break above resistance at 0.9160 likely to encourage further gains.


ends

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Crown Accounts: Government Ekes Out Six-Month Surplus Of $9M

The New Zealand government eked out a tiny surplus in the first six months of the fiscal year as growth in domestic consumption lifted the goods and services tax take, while uncertainties over the Kaikoura earthquake costs meant expenses were less than expected. More>>

ALSO:

Almost 400 Jobs: Shock At Cadbury's Dunedin Factory Closure

Workers at Cadbury in Dunedin are reeling after learning this morning that the iconic Cadbury factory is to close, with the loss of almost 400 jobs... “The company had reported it was doing well and this has come out of the blue,” says Chas. More>>

ALSO:

Transport: Boards Of Inquiry For Auckland Roading Projects

Boards of Inquiry have been appointed to decide on two significant Auckland roading projects in a move which will get a decision by the end of the year, Environment Minister Dr Nick Smith and Conservation Minister Maggie Barry announced today. More>>

ALSO:

Three Months On: Quake Reciovery In Kaikōura And Elsewhere

Three months after the magnitude 7.8 earthquake on 14 November, encouraging recovery progress is being made in affected communities. More>>

ALSO:

Jetstar, Qantas For Govt Transport: Government Still In Talks With Air NZ

The government is still negotiating with national carrier Air New Zealand in a cross-agency air travel contract that will add a number of new airlines to the list of approved flyers. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news