The Kiwi dollar suffered a minor setback after speculation of further interest rate hikes was dampened by a report by Moody?s, which suggested that increasing interest rates were likely to cause a slowdown in the fixed-rate mortgage dominated housing market.
However, additional rallies by New Zealand?s currency are possible given estimates that the market-moving fundamentals to be released this week may convince Alan Bollard to add to the three interest rate increases implemented this year.
[B]Headlines:
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[B]- Slowdown in Home Buying Activity Lowers Chance of Interest Rate Increase[/B]
Banking System Outlook: New Zealand?, a report published by Moody?s Investors Service, suggested that increasing interest rates were likely to cause an abrupt slowdown? in the fixed-rate mortgage dominated housing market. As RBNZ continues its anti-inflationary endeavor to prevent a housing boom, the data dampened expectations of another rate hike by the Reserve Bank.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ajZAeNDdZIEg
[B]- New Zealand?s Banking System Rated Stable by Moody?s[/B]
The outlook for New Zealand?s banking system was rated stable by Moody?s Investors Service since the historical trend of continued economic growth set the stage for steady financial circumstances. The banking system does, however, face hurdles from the strength of the Kiwi dollar, the possibility of credit concentration, and competition among banking institutions.
http://www.stuff.co.nz/southlandtimes/4121879a22356.html
[B]- Kiwisaver & High Interest Rate Stoke Investor Confidence To Record High
[/B]Investor confidence, as measured by the ASB investor confidence survey, peaked to a record high of 29 percent in the second quarter. Investment in rental property was indicated as the vehicle of choice, recording a quarterly net rise of 22 percent, despite interest rate hikes by the RBNZ.
[B]Market Activity:[/B]
[B]Currency Market - NZD:[/B]
The Kiwi dollar suffered a minor setback after speculation of further interest rate hikes was dampened by a report by Moody?s, which suggested that increasing interest rates were likely to cause a slowdown in the fixed-rate mortgage dominated housing market. The New Zealand dollar slid to 0.7808 at 5:52 p.m. in Wellington, from an intraday high of 0.7831 earlier today and the post-float high of 0.7881 set last week. New Zealand?s currency continued to gain against the Japanese yen, rising to 96.54 yen from 96.48 yen on July 6.
The weekly economic docket is packed with market-moving releases may confirm the RBNZ?s inflationary fears and sway Alan Bollard to add to the three interest rate increases implemented this year. Results of a Credit Suisse index on overnight trading in interest rate swaps suggest a 24 percent possibility that RBNZ may boost interest rates again at the monetary policy review on July 26.
[I]NZDUSD(Daily Chart)
Source: Bloomberg[/I]
[B]Equity Market - NZSX-50:[/B]
The first trading session of the week proved favorable for New Zealand?s equity markets after a report by Moody?s Investors Service diminished speculation of another interest rate increase by the Reserve Bank of New Zealand. The release of Banking System Outlook: New Zealand? was followed by a retreat in the Kiwi dollar that in turn boosted the prospects, and hence stock value, of New Zealand?s export manufacturers. After the 13-point decline on Friday, the benchmark NZSX-50 index recovered Monday to close up 15.12 points at 4238.65 on turnover of NZD 90.9 million.
[I]NZSX-50 Index (Daily Chart)
Bloomberg[/I]
[B]Fixed Income Market - 10-year Government Bonds:[/B]
Yields on New Zealand?s benchmark 10-year government bonds rose by 3 basis points to 6.742 percent, as of 1342 EST in New York, which may in part be following the direction of the US Treasury yields, which have benefited from tight US labor market conditions. With a potential for accelerating inflation, investor appetite for government debt could diminish.
[I]New Zealand 10-year Government Bonds (Daily Chart)
Bloomberg[/I]