I have to run into a meeting now, but will explain when I get back. Essentially, though, one number does not a trend make. The last 5 months were miserable retail sales.
I think the figures were perhaps so much above consensus that they are probably an anomaly. Also, the cross has lost all of its post-retail fig gains. So a false dawn.
I am interested in the threads comments on nz economy in general. I live down here and have interests in Australia & nz so monitor the currency cross rates to determine asset values. I am not a short term trader so apologies up front if my take is too long term. Market is very bearish on nzd, however it is wrong to make an assumption that the economy in general is going to the dogs. nz is probably in a technical recession right now (2 quarters of negative growth), however the low nzd/USD is a major boost to exporters who have suffered fr past few years with high rates (but survived with those high rates!) The primary producers are happy right now and will be making good money at these exchange rates. Real estate has flattened off however the top end of the market is still very strong. The local stockmarket is at or near its high - money is coming into the currency from Australia to take advantage of the opportunity to purchase assets made cheap by the low crossrate. At .83 cents the nzd looks too cheap against the A$ and I would expect it to trend back to the .87 area over the next few months. Local nz business confidence is improving in latest surveys, Auto sales are up and you know what? It doesn't feel like a recession down here! Obviously my long term views may not be interesting fr short term traders but may be something to keep in the back of your minds. Second point I want to get feedback on is the looming shadow of uridashi maturities. It has been talked about down here a lot in the media. Everyone is picking that the Japanese housewives will take flight at the possibility of lower rates and put their money into USD or maybe A$ uridashis. Lets fr one minute take the opposing view. Put an apron on and become a Japanese housewife - you purchased Kiwi dollar uridashis a couple of years ago when the kiwi was pretty high and you got great returns. You may also have some A$ uridashis also at a reasonable return. Today you are still getting great returns but are faced with a maturity. What should you do? Swap to another currency with a lesser yield and face a significant capital loss on the exchange rate in doing so? Or hang in there and hope that in a couple of years the rate will have improved and you can get out then? Remember these are people who are responsible for their families savings - I can't see them nor their families being too impressed taking a capital loss. They are not fund managers who collect a salary and holiday on the management fees and they don't like eating the frog. I would guess that most will consider a rollover and hope for better days in two years time. Heres the other thing they might do. Consider that A$ uridashis are also up for maturity. The nz$ looks cheap against the A$ right now and the rate is better. Why not swap from A$ uridashis to nz$ Uridashis and make a nice capital gain when the nz swings up against the A$. Either way, uridashi maturities may not be the killer blow to the nz$ that everyone is talking about. Of course this is speculation, but worth thinking about.... Good luck for your trades
1. I agree - a lower currency helps NZD exporters. The currency, however, can rebound the moment the market returns to the view the NZD economy is not weak. It's a double edged sword. 2. All the housewives you mentioned will probably move their money to AUD or USD because the media will be playing up the drop off in NZ's economy. Makes no difference what the truth is to them, they'll go with the herd. 3. If CPI is tame this coming week, a sell off in NZD will occur, because people will believe that rates will drop sooner rather than later.
Some statistics I find very interesting are the percentages of GDP from exports of goods and services- New Zealand..... 29.8% Australia........... 18.1% United Kingdom.. 25.1% United States..... 9.5% Japan............... 11.8%
I am kind of 50:50 on my theory of which way the housewives will jump to be honest, it is the sword hanging over the head of the currency and will probably prevent any players from becoming too bullish on NZD at least until it becomes obvious as to whether they are a factor of not. The other piece of the equation which I forgot to mention the other day was that on April 1st, the government increased the "Working for Families" tax rebates which puts another $100 a week into the hands of families. This is not a low income targeting initiative, it affects middle income earners, and is on top of what they were currently getting in tax rebates. I don't imagine this extra benefit will go into savings accounts - it will be spent on increased petrol prices, etc so will end up back in the economy, as do all social welfare benefits. This has to be viewed as positive for retail sales figures and potentially inflationary. On top of this the banks have reduced their 2 year fixed mortgage rates for home buyers which has been the big problem for the Reserve bank. All in all, lots of contrary factors at play. Banks have factored in a reduction in the interest rates and most are looking at June, but Bollard (RB governor) is a conservative bugga who probably regrets not raising interest rates sooner last year, so he will likely only drop them when he is absolutely certain he has a tight lid on inflation. The banks are maybe too optimistic at present as to when the interest rates willcome down. Good luck.
The kiwi traditionally has been slow to rise and fast to fall. If it does break below 60 cents - then 55 cents has to be the next target and could reach it quickly. 3 months ago it was easy to pick the direction of the currency - now there are more question marks. If it does form a base here then it is highly unlikely to rise at the rate it fell, so plenty of trading opportunities for you guys !
Got this from IFR - I simply don't understand what theyr'e saying. Can anyone explain? 12:52 FX OPTIONS: NZD/USD Buying of 1 Year Low Delta NZD Calls] London, April 18. We have been informed that an estimated quarter-yard of 1 year 0.7300 strike NZD call options have traded today. NZD/USD last traded at/above 0.7300 in May last year.
It says that 250mn worth of 73 calls have traded on NZD today. Implying that banks are buying deep out-of-the-money calls for a hyper return (they believe a bottom on this cross), if NZ inflation figures imply rate hikes in the future, and the carry-trade scenario is back on again.