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

 


Kiwi consolidates over support as geopolitical tensions ease

Kiwi consolidates above major support as geopolitical tensions ease

By Garry Dean (Sales Trader, CMC Markets New Zealand)
12 August 2014

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. The 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 sell-off in risk assets after news of US air strikes 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 (NZ) 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 NZ’s unemployment rate is below Australia’s. There are some concerns being raised in Australia, 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

 

Scoop Business: RBNZ Keeps OCR At 3.5%, Signals Slower Pace Of Future Hikes

Reserve Bank governor Graeme Wheeler kept the official cash rate at 3.5 percent and signalled he won’t be as aggressive with future rate hikes as previously thought as inflation remains tamer than expected. The kiwi dollar fell to a seven-month low. More>>

ALSO:

Weather: Dry Spells Take Hold In South Island

Many areas in the South Island are tracking towards record dry spells as relatively warm, dry weather that began in mid-August continues... for some South Island places, the current period of fine weather is quite rare. More>>

ALSO:

Scoop Business: Productivity Commission To Look At Housing Land Supply

The Productivity Commission is to expand on its housing affordability report with an investigation into improving land supply and development capacity, particularly in areas with strong population growth. More>>

ALSO:

Forestry: Man Charged After 2013 Death

Levin Police have arrested and charged a man with manslaughter in relation to the death of Lincoln Kidd who was killed during a tree felling operation on 19 December 2013. More>>

ALSO:

Smells Like Justice: Dairy Company Fined Over Odour

Dairy company fined over odour Dairy supply company Open Country Dairy Limited has been convicted and fined more than $35,000 for discharging objectionable odour from its Waharoa factory at the time of last year’s ”spring flush” when milk supply was high. More>>

Scoop Business: Dairy Product Prices Decline To Lowest Since July 2012

Dairy product prices dropped to the lowest level since July 2012 in the latest GlobalDairyTrade auction, led by a slump in rennet casein and butter milk powder. More>>

ALSO:

SOE Results: TVNZ Lifts Annual Profit 25% On Flat Ad Revenue, Quits Igloo

Television New Zealand, the state-owned broadcaster, lifted annual profit 25 percent, ahead of forecast and despite a dip in advertising revenue, while quitting its stake in the pay-TV Igloo joint venture with Sky Network Television. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

Standards New Zealand

Mosh Social Media
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news