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.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Shocking Dairy Footage: MPI Failing Our Animals And Damaging Our Reputation

Greens “Nathan Guy needs to urgently look into how his ministry is enforcing animal welfare standards, how these appalling incidents happened under its watch and what it’s going to do prevent similar incidents happening again in the future." More>>


Land & Water Forum: Fourth Report On Water Management

The Land and Water Forum (LWF) today published its fourth report, outlining 60 new consensus recommendations for how New Zealand should improve its management of fresh water and calling on the Government to urgently adopt all of its recommendations from earlier reports. More>>



Welcome Home: Record High Migration Stokes 41-Year High Population Growth

New Zealand annual net migration hit a new high in October as more people arrived from than departed for Australia for the first time in more than 20 years. More>>


Citizens' Advice Bureau: Report Shows Desperate Housing Situation Throughout NZ

CAB's in-depth analysis of over 2000 client enquiries about emergency accommodation shows vulnerable families, pregnant women and children living in cars and garages, even after seeking assistance from the Ministry of Social Development and Housing New Zealand. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news