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

 


Continued US Dollar strength keeps Kiwi on the ropes

Prospect of continued US Dollar strength keeps Kiwi on the ropes.


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

The weekend’s gathering of global central bankers at Jackson Hole has reinforced the different challenges facing major economy’s at present, and endorsed the view of a stronger US Dollar. Fed Chair Janet Yellen acknowledges the improving unemployment rate, but remains cautions given the significant slack in the labour market, the low level of participation, high part-time workers and lack of pressure on wages. That said, her address on the weekend was less dovish than expected, and traders seized on her comment that rates may need to rise sooner than expected if the labour market recovers faster than anticipated. This has propelled the US Dollar to levels not seen in almost a year, continuing to keep the Kiwi under pressure.

In contrast, ECB President Mario Draghi’s speech confirmed the ECB stands prepared to respond with all its available tools should inflation drop further, suggesting QE style stimulus is increasingly likely. European equity markets have responded to this dovish address with rallies of close to 2% overnight. Not surprising then to see Euro gap below 1.3200 at yesterday’s open, with the Kiwi losing half a cent in turn. RBNZ intervention rumours seem unfounded, the Kiwis decline merely reflecting the trader assessment that US rate hikes are drawing nearer, and the US dollar has potential to appreciate further in this environment. This suggests Kiwi resistance will again be solid at 0.8400, with key medium-term support seen at 0.8260.

The level of the TWI will be of growing interest to the RBNZ, as we open this morning at 78.80. This is well below the 79.7 September projection detailed in the June MPS, and also below the 79.0 December projection. The MPS for September will be a balancing act, as the RBNZ weigh last week’s large PPI declines, falling RBNZ inflation expectations and weaker dairy prices with the inflationary impact of increasing demand pressures from surging immigration and now a weaker exchange rate. The NZD/AUD cross has broken below the psychological 0.9000 level, but now faces major support at 0.8930. This was a key level of resistance throughout the Aug – Nov period last year, and should provide solid support now, with the downside move in this cross looking accentuated at present.

ends

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Scoop Business: Wheeler Downplays Scope For ‘Large’ Rates Fall

Reserve Bank governor Graeme Wheeler says some market commentators are predicting further declines in interest rates that would only make sense for an economy in recession, although some easing is likely to be needed to maintain New Zealand’s economic growth. More>>

ALSO:

Ruataniwha Dam: Consent Conditions Could Mean Reduced Intensity

Legal advice sought by the Hawke’s Bay Regional Council on the Ruataniwha Dam consent conditions has confirmed that farmers who sign up to take water from the dam could be required to reduce the intensity of their farming operation to meet the catchment’s strict nitrogen limit. More>>

Health And Safety: Bill Now Sees Rules Relaxed For Small Businesses

Health and safety law reform sparked by the Pike River coalmine disaster has been reported back from the industrial relations select committee with weakened requirements on small businesses to appoint health and safety representatives and committees. More>>

ALSO:

Bearing Fruit: Annual Fruit Exports Hit $2 Billion For First Time

The value of fruit exported rose 20 percent (up $330 million) for the June 2015 year when compared with the year ended June 2014. Both higher prices and a greater quantity of exports (up 9.0 percent) contributed to the overall rise. More>>

ALSO:

Interest Rates: NZ Dollar Jumps After RBNZ Trims OCR

The New Zealand dollar jumped more than half a US cent after Reserve Bank governor Graeme Wheeler cut the official cash rate by a quarter-point and said the currency needs to be lower, while dropping a reference to criteria that justified intervention. More>>

ALSO:

Drones: New 'World-Class' Framework For UAVs

The rules, which come into effect on 1 August, recognise the changing environment and create a world-class framework that accommodates ongoing development while still ensuring the safety of the public, property and other airspace users. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news