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: Govt Resisting Pressure To Pump More Cash Into Solid Energy

Prime Minister John Key says it is “not the government’s preferred option” to make a fresh capital injection into the troubled state-owned coal miner, Solid Energy, but dodged journalists’ questions at his weekly press conference on whether that might prove necessary... More>>

ALSO:

Lagest Ever Privacy Breach Award: NZCU Baywide Accepts “Severe” Censure In Cake Case

NZCU Baywide says that once it was found to have committed a breach of a former staff member’s privacy, it had attempted to resolve the matter... the censure and remedies for its actions taken almost three years ago are “severe” but accepted, and will hopefully draw a line under the matter. More>>

ALSO:

Scoop Business: PayPal Stops Processing Mega Payments; NZX Listing Still On

PayPal has ceased processing payments for Mega, the file storage and encryption firm looking to join the New Zealand stock market via a reverse listing of TRS Investments, amid claims it is not a legitimate cloud storage service. More>>

ALSO:

Housing Policy: Auckland Densification As Popular As Ebola, English Says

Finance Minister Bill English said calls by the Reserve Bank Governor for more densification in Auckland’s housing were “about as popular in parts of Auckland as Ebola” would be. More>>

ALSO:

Crown Accounts: NZ Government Deficit Smaller Than Expected In First Half

The New Zealand government's operating deficit was smaller than expected in the first six months of the financial year, as the consumption and corporate tax take rose ahead of forecast in December, having lagged estimates in previous months. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news