Opinion: Upward momentum lost, next stop is 0.6000

By Roger J Kerr At the risk of boringly repeating myself, here are some very good reasons why the Kiwi dollar exchange rate against the USD will move to near and just below 0.6000 over coming weeks, as opposed to hitting 0.6500 again:- - Global commodity prices are heading back down, along with oil, equity markets and the AUD currency. The Kiwi dollar follows all of them.

- The NZ:US interest rate differential is no longer reducing, it currently suggests a 0.5750 NZD/USD exchange rate. - The NZD forex market is vulnerable to more bad news for our largest industry, the dairy industry. If wholemilk powder prices continue to fall, Fonterra may well be forced to drop their forecast milksolids payout to $4.00/kg. Very bad news indeed for the whole economy. - International FX markets are not prepared to sell the USD aggressively above $1.4000 against the Euro. The US dollar weakness of recent months is largely past. - Uridashi and Euro-Kiwi investors must prefer new AUD bonds to replacement NZD denominated issues. - Asia-Pacific Risk Management's short-term NZD FX model/indicator has been pointing to a level of 0.5900/0.6000 for several weeks now. We seem to be heading that way. The "regret factor" haunting exporters who failed to hedge large amounts, long term when the Kiwi was nearer to 0.5000 earlier this year (for whatever reason) is starting to reduce in intensity. Targeting NZD/USD rates from here down to 0.5800 is a prudent strategy for those that missed out earlier. Waiting and hoping for 0.5300 before acting is as risky as doing nothing at 0.5000 a few months back and hoping for 0.4500. "”"”"”"”"”- * Roger J Kerr runs Asia Pacific Risk Management. He specialises in fixed interest securities and is a commentator on economics and markets. More commentary and useful information on fixed interest investing can be found at rogeradvice.com