Rising NZD indicates different sort of traders

I do not believe that there's any fundamental cause for the NZD to rise so much recently. I think it's sort of like spillover from flows into the AUD. I'd suggest that it illustrates not the usual FX trading but money wanting to diversify away from elsewhere (Euro?) to the AUD and coming from a diversification mentality, more like funds & stock-traders. It all has the "scent" of a different kind of money flowing. Any comments welcome.

 

Not really... It's just that NZD has been undervalued and is now coming back. Also, it's about milk.

 

Not to forget about wool and those tasty lamb chops!

 

It, maybe could be many things but undervaluation is not one of them. It's not 'coming back' it's never floated anywhere near this level before ... ever

 

Are you sure about that? Looking at NZDUSD is not really a very meaningful way to think about the value of NZD. Current level of NZDUSD is mostly a function of the weakness of USD, rather than anything to do with NZD.

Based on a variety of my fair-value models, NZD was arnd 15% undervalued, vs for example AUD. It's quite a bit less undervalued now.

Moreover, if you look at NZD TWI, you'll be able to see what I mean (see attached).

 

Yes, the real comparison is between the kiwi and aussie.

The kiwi didn't float to these levels vs the US ... the US sank ... stonelike.


So the kiwi has reacted to bad news and the aussie reacted to the "China will buy our minerals and make us all rich" story. Now we seem to have a correction in both stories and the trend seems to be back towards a more typical ratio ... or not

 

Don't forget the earthquake, as well... I made some good money on being short AUDNZD.

 

Did you read the statement today? Very deserving of it's strength.

http://www.forexfactory.com/news.php?do=news&id=297832

 

Yep, RBA and RBNZ diverging the other way now... I wish I stayed short AUDNZD .

 

I can remember the days that it was valued higher than the USD and closer to the cable.