HiFX's senior dealer Dan Bell and Bernard Hickey looked in their weekly 'Never a Dull moment' review at the New Zealand dollar's slide below its 80.5 USc to 83 USc range early on Friday.
The currency's slide below 80 USc is the first below that key mark in almost four months and follows disappointing figures on economic growth, jobs and commodity prices in America, Australia and New Zealand.
"A break under 80 USc is quite important and if we continue to see it drop and close under 79.80 we could see it drift back into the mid 70s which is where we were in October and November last year," Bell said.
He also looked at the Reserve Bank of Australia's surprise 50 basis point cut in its offical rate on Tuesday, noting however that financial markets had been expecting 100 basis points of cuts over the coming year.
"Outside of the mining investment boom there's not a lot of positive news out of Australia," he said, noting a drop to historic lows for Australian bond yields, which are closely linked to New Zealand's falling bond yields.
"Given our yields are lower now it's less attractive for investors to hold our currency and with commodity prices going lower, investors are looking at the overall situation and saying maybe it's not such a good idea to be holding New Zealand dollars," Bell said.
He pointed to the New Zealand dollar's fall against the British pound this week to under 50 pence and weakness vs the euro.
Markets will be watching the reactions over the next week to France's presidential election, where socialist candidate Francois Hollande is expected to beat encumbent Nicholas Sarkozy.
It will also watch key Non Farm Payroll figures due late on Friday night. Economists are expecting growth of around 160,000.
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Dan Bell is the Senior Dealer at HiFX, a UK-headquartered foreign exchange dealer with significant operations in Australia and New Zealand. It has a dealing room in Auckland. See more detail here.
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1 Comments
Probably the only thread to use!
When you read this...think of Alan Bollard dancing on the end of the strings..delaying pretty much the same reg controls on the banks down here...
"It needs to be clearly and widely understood, though, that the City is trying to destroy King's reputation for the simple reason that he is pretty much the only senior UK policy-maker still arguing for the kind of robust bank regulations, much tougher than those currently proposed, that are needed to prevent another serious financial meltdown. "
Get the message fellow peasants....King at the BoE can see "another serious financial meltdown" on its way if the banks are not jammed into a steel coffin and the lid welded down....what can Alan see heading our way I wonder!
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