Kiwi adjusts cross bar to Euro 0.63c and US 0.80

10.58 NZST, Wednesday 20 June 2012

Kiwi adjusts cross bar to Euro 0.63c and US 0.80

By Andrew May (Sales Trader, CMC Markets New Zealand)

The six month lows witnessed a month ago seem now merely a blip on the radar as the New Zealand dollar once again triumphantly adjusts its target range to 0.63c Euro and 0.80c US consecutively.

Investors are unperturbed at the lack of consistency shown in the Spanish banking sector where only this past Monday night 10yr borrowing costs surpassed 7.28%. Investors are seeing the glass half full again. Perhaps spurred on from the recent nail biting Greek election finish but more so primed and awaiting an imminent decision on US Fed easing.

At the conclusion of the two day Open Markets Committee meeting tomorrow morning, the statement will be bold and brash - keep interest rates lower for longer. I would say more likely via an extension of operation 'Twist' however don't cross off a possible third round of QE.

Either way 'bears' are choosing to hibernate back in their caves and risk is back on the table for now. With the DOW up 1% again last night, the Kiwi outperformed itself against the safe haven greenback. In fact most long USD positions are clearly being squared off against major crosses.

Pending positive news from the FOMC, expect the Kiwi to easily retrace Euro 0.6350 targeting February historic 0.6376 highs.

The NZDUSD should cross 0.80c early today pushed higher no doubt through a modest 0.5% result in Fonterra's global milk dairy price auction earlier this morning and fuelled through a robust balance of payments. Tomorrow's local growth estimates of 0.4-0.6% (QoQ) should firmly provide support at 0.8050 and could push further to the upside of 82c as long as expectations of global policy easing continue.
ends

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