Here's our summary of the key news overnight in 90 seconds at 9 am, including news the New Zealand dollar is under US79 cents this morning and below A90 cents with the Trade Weighted Index at 76.63 after Reserve Bank Governor Graeme Wheeler’s surprise statement last Thursday afternoon.
Wheeler said the level of the Kiwi was unjustified and unsustainable and it was susceptible to a significant downward adjustment over the next six to nine months.
At about 3pm today we’ll get data showing whether the Reserve Bank intervened in the currency markets in late August to try and weaken the NZ dollar, as has been speculated.
In Hong Kong police have used tear gas and pepper spray, and baton charged pro-democracy protests after student and pro-democracy leaders launched a "new era" of civil disobedience to try and pressure China into granting full democracy.
The moves from activists are being seen as the most tenacious civil disobedience since Hong Kong returned to Chinese rule from British rule in 1997, and come after Beijing last month rejected demands for people to freely choose Hong Kong's next leader. There's live coverage from the South China Morning Post here.
News high-profile US investor Bill Gross had left Pimco shook the bond market on Friday. Pimco co-founder Gross, who managed the US$222 billion Pimco Total Return Fund, is joining Janus Capital Group to manage a US$13 million fund. The Wall Street Journal reported 70 year-old Gross departed Pimco after losing a showdown at the firm, and after he sent a scornful email to other top executives and was warned to tone down volatile behaviour that included yelling at co-workers. Gross co-founded Pimco in 1971.
It emerged last week that the Securities and Exchange Commission is investigating whether Pimco artificially boosted the returns of a popular fund aimed at small investors, with Gross having reportedly been interviewed by SEC investigators.
Also in the US on Friday there was news the economy expanded at a revised 4.6% annualised rate in the second quarter, its fastest growth since the final quarter of 2011 as companies boosted investment and households increased spending. The revision was up from 4.2%.
Britain’s first limits on banks’ mortgage lending in decades come into force this Wednesday as the Bank of England strives to take some heat out of the home loan market. Lenders will be prevented from allocating more than 15% of new residential mortgages to individuals borrowing four and a half times their income or greater.
You can check what happened on Friday here, and see our Economic Calendar here »
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11 Comments
The yields on the NZD must still be a lot higher than every other stable democracy?
Not high enough to cover the risk of collective earnings failing to service outstanding debt , hence the recent NZDUSD adjustment to pressurre the RBNZ to enforce a higher outcome.
Interesting that the author failed to note the underlying causes of the dilemma described and the inevitable transition to irredeemable fiat base money;
After the Second World War, a system similar to a gold standard and sometimes described as a "gold exchange standard" was established by the Bretton Woods Agreements. Under this system, many countries fixed their exchange rates relative to the U.S. dollar and central banks could exchange dollar holdings into gold at the official exchange rate of $35 per ounce; this option was not available to firms or individuals. All currencies pegged to the dollar thereby had a fixed value in terms of gold.[5]
Starting in the 1959-1969 administration of President Charles de Gaulle and continuing until 1970, France reduced its dollar reserves, exchanging them for gold at the official exchange rate, reducing US economic influence. This, along with the fiscal strain of federal expenditures for the Vietnam War and persistent balance of payments deficits, led US President Richard Nixon to end international convertibility of the dollar to gold on August 15, 1971 (the "Nixon Shock").
This was meant to be a temporary measure with the gold price of the dollar and the official rate of exchanges remaining constant. Revaluing currencies was the main purpose of this plan. No official revaluation or redemption occurred. The dollar subsequently floated. In December 1971, the “Smithsonian Agreement” was reached. In this agreement, the dollar was devalued from $35 per troy ounce of gold to $38. Other countries' currencies appreciated. This was the official price of the dollar, and policies to maintain its value relative to other currencies. However, gold convertibility did not resume. In October 1973, the price was raised to $42.22. Once again, the devaluation was insufficient. Within two weeks of the second devaluation the dollar was left to float. The $42.22 par value was made official in September 1973, long after it had been abandoned in practice. In October 1976, the government officially changed the definition of the dollar; references to gold were removed from statutes. From this point, the international monetary system was made of pure fiat money. Read article
... aha , it's Monday ... this is one of the days of the week that the NZ Labour Party have set aside for their ritual blood-letting , back-stabbing and ongoing political suicides ...
The other days for these activites are Thursday , Sunday , Wednesday , Saturday , Friday ... and , of course , Tuesday ....
Overseas Investment Office at work looking out for you
Remember Nick Leeson the Singapore based trader who single-handedly destroyed Barings Bank
Singapore-based Richard Magides, former Barings Bank trader in 2002 co-founded Asian hedge fund Artradis Fund Management, which was worth US$4.5 billion at its 2008 peak before being closed down in 2011
In 2012 Magides was granted Overseas Investment Office approval to buy a Bay of Islands vineyard and develop a luxury accommodation wine retreat in a deal worth about $6.2 million
In 2013 Magides was granted consent to buy 2737ha of Ben Avon Station in the South Island and develop an exclusive eight-room luxury wilderness lodge offering guided hunting, fishing and horse riding in a deal worth about $6.5 million
In 2014 Magides pays $8 million for Auckland penthouse apartment
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11333232
What is the enhanced economic benefit to New Zealand of these acquisitions?
... he brought a tonne of money into NZ , from outside ... at no cost to our infrastructure .... one mighty mega advantage ...
And he poured even more money into some of those properties ... creating jobs , and increasing productivity there ... another enhancement to the NZ economy ...
... we should give that chap a knighthood , or erect a statue in his honour , at the very least ... meebee he'll give Laila Harre a job... she needs a new sugar-daddy ...
And he poured even more money into some of those properties - has he?
and creating jobs - has he?
and increasing productivity there -- has that happened ?
and other enhancements to the NZ economy .-- really? what enhancements ?
Do you have any knowledge of whether any of that has "actually" happened ????
Remember Nick Leeson the Singapore based trader who single-handedly destroyed Barings Bank
A myth that deserves amplification - I was highly connnected with the SIMEX, due to my London job description, at the time Barings Bank placed it self at the mercy of the big four Japanese broking cum investment houses.
Throughout this debacle it was Barings' chairman, Peter Baring, and only him, who wrote the doubling down margin checks to the Singapore futures exchange that finally bankrupted the family firm.
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