Comments by the RBNZ Deputy Governor noting that foreign exchange intervention is an on-going process led the New Zealand dollar lower amidst a retreat in speculative investment. The Kiwi dollar has maintained its lead as the world?s best performing currency over the past year as a result yield differentials, but sustained intervention by the RBNZ could knock the currency out of its place.
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[B]Headlines:[/B]
-[B] Surge In World Dairy Prices Buoy Exports[/B]
The annual trade deficit for the year ended May 31, 2007 declined to NZD 5.87 billion, worse than the median analyst estimate of NZD 5.82 but an improvement over April?s gap of NZD 5.99 billion. The deficit narrowed mainly on account of a record surge in the value of butter and milk powder, as world prices of dairy products have climbed up 74 percent in May compared to the prior year. NZ Herald - Breaking news, latest news, business, sport and entertainment - NZ Herald
- [B]Central Bank Tries To Dissuade One-Way Bets against the Kiwi Dollar
[/B]An article by Grant Spencer, the Deputy Governor of the Reserve Bank of New Zealand, attempted to discourage speculative interest in the New Zealand dollar. Comments about the central bank?s commitment to maintain the interest rate at a “more sustainable level” may be an indication of further intervention by RBNZ. - [B]GDP Growth Rate May Add To RBNZ?s Inflationary Concerns[/B]
New Zealand?s quarterly expansion rate is expected to print at a two-year record of 1 percent from Q4 2006, adding fuel to speculation that New Zealand?s central bank may resort to further foreign exchange intervention to dampen inflation.
Bloomberg - Are you a robot?
[B]New Zealand Market News:[/B]
[B]Currency Market: NZD
[/B]Comments by the RBNZ Deputy Governor noting that foreign exchange intervention is an on-going process led the New Zealand dollar lower amidst a retreat in speculative investment. The Kiwi dollar has maintained its lead as the world?s best performing currency over the past year as a result yield differentials, but sustained intervention by the RBNZ could knock the currency out of its place. During the Asian session, a 6.3 percent slide in the Westpac Consumer Sentiment index in Q2 also played a key fundamental role for the Kiwi dollar?s retreat below its 22-year high against the US dollar to 0.7646 after peaking to post-floatation high of 0.7693. Additional signs that a minor carry trade unwind was in play came as the Kiwi dollar fell against the Japanese yen to 0.9353 from 0.9441 on Tuesday. Meanwhile, the New Zealand dollar gained against the Aussie for the sixth straight day, the longest period of gains in more than six months.
[I]NZDUSD(Daily Chart)
Source: Bloomberg[/I]
[B]Equity Market : NZSX-50[/B]
New Zealand?s equity market extended its slide for the fifth consecutive day as investor sentiment was subdued by a combination of factors that included soft economic data, the RBNZ?s high Official Cash Rate, and global concerns over turbulence in the US credit market. The benchmark NZSX-50 Index tumbled down 48.76 points, or 1.14 percent, to close at 4203.27. Turnover printed at $202 million and losses outnumbered gains 85 to 16 on 140 stocks traded on the NZSX-50. A prominent market mover was Air NZ as the failure of a strategic venture led Qantas to divest its 4.2 percent stake, prompting a 25 cents decline in Air NZ stock to 265. As the potential sale of Auckland Airport remains the subject of speculation, Port companies continue to lead the gains, with Northport up 10 cents to 340.
[I]NZSX-50 Index (Daily Chart)
Source: Bloomberg[/I]
[B]Fixed-Income Market: New Zealand 10-year Government Bonds[/B]
Government bond yields continue to slide globally as turbulence in the US subprime mortgage arena has sharply cut down the risk appetite of investors worldwide. The yield on the benchmark 10-year government bond dropped 4 basis points to 6.70 percent.
[I]New Zealand 10-year Government Bonds (Daily Chart)
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[I]Source: Bloomberg[/I]