May 21, 2010
Did someone just hire a mercenary to take out the com-dolls!? The NZDUSD was part of the big com-doll hit yesterday, as it dropped another 90 pips to end the day at 0.6621.
Similar to the moves seen in the AUD and CAD, the Kiwi has been caught up in round after round of broad based commodity selling. Debt contagion fears have sparked risk aversion, which has also led to traders shifting their positions away from higher yielding currencies like the NZD.
Still, the Kiwi’s losses weren’t as severed as those of its com-doll brothers. It found some support when the government’s budget balance plan was released. According to the plan, the Kiwi government will raise sales tax from 12.5% to 15%, while cutting income taxes. This would hopefully cut the government’s debt to GDP ratio of 90%, allowing the country to post a surplus by 2016.
I can see why traders saw this as goods news for New Zealand – governments around the world are busting their butts to fix their budget s to avoid a sovereign debt crisis that are breaking out like pimples on the euro zone’s face.
No data is coming out from New Zealand today, but that doesn’t mean you can rest on your heels. Make sure you got your dance shoes on, as we may see some large swings to end the week!
"The only cable I watch is the pound baby."