Daily Economic Commentary: New Zealand

The Kiwi, just like its fellow comdoll, the Aussie, flexed its muscles against the dollar last Friday. The Kiwi staged a stellar rally, heading all the way to a high of 0.7440, more than 100 pips from its Asian open price.

The country’s producer price index which was just released today was ugly. Instead of remaining flat, the report showed that the prices of merchandise purchased by manufacturers decreased 1.1% during the third quarter, causing the Kiwi to shed a couple of pips. 

Looking ahead, New Zealand’s cupboard doesn’t contain any high-impact economic reports so the Kiwi’s direction would probably be determined by the market’s risk tolerance once again.

Another good day at the office for the Kiwi! The NZD was able to post gains against the US dollar once again, as NZD bulls overcame some choppy trading that happened after Bernanke’s speech yesterday. Ultimately, the NZDUSD closed the trading day at 0.7489.

With no high impact reports coming out over the next few days, Kiwi trading will be dominated by risk sentiment. Given how commodities have been trading strongly as of late, we may see the NZDUSD push higher to test for yearly highs if sentiment remains strong. Just take a look at AUD and CAD trading - notice how those two pairs are pushing higher and higher? Who knows – the NZD might just tag along!

The Kiwi lost ground against the greenback as the RBA hinted that they would pause their rate hikes come December. After lingering slightly above the 0.7500 mark, the NZDUSD dropped to a low of 0.7409 yesterday.

No economic reports were released from New Zealand in the past 24 hours. Meanwhile, weak economic data from the US could’ve spurred risk aversion, pushing the NZDUSD pair even lower. US industrial production and PPI data came in worse than expected, causing investors to flock back to the safe-havens USD and JPY.

For today, New Zealand’s economic schedule is report-free again, leaving US economic data as the main driver of the NZDUSD price action. The US will release their inflation reports and building permits data later on and another set of weak data could cause risk aversion to prolong its stay in the markets.

For a moment there it looked that the NZDUSD was going to finally move above the 0.7500 handle. This was not the case, however, as it sunk as soon as the bell in New York rang. The pair closed at 0.7465 after climbing as high as 0.7499.

No economic reports were due in New Zealand yesterday. In the US, new housing starts unexpectedly fell by 10.6% in October. The number of annualized count fell to 529,000 units which is its lowest level since April of this year. New building permits also dropped by 4% during the same period to 552,000 units. The expiration of the government’s $8,000 tax subsidy to first-time home buyers could have contributed to the slide in construction activity.

Appetite for higher yielding assets like the NZD became soft following the release.

New Zealand will be idle again today in terms of economic reports. The US, on the other hand, will publish its latest weekly initial jobless claims data. Unemployment claims forecast is pegged at 503,000. Note that for the last 3 weeks, the actual figure came in below expectations. Risk appetite could spark if this happens again. Such would be bullish for the NZD.

Just like the Aussie and the Loonie, The risk aversion camp brought the Kiwi down to last week’s low at 0.7300 in yesterday’s trading session. The price of commodities, like gold and oil, also fell, failing to provide support for the Kiwi’s sharp fall.

The economic calendar will be quiet today as no important data is scheduled for release. The trading week is coming to a close and the risk aversion seems to be the dominating sentiment. Will this “buy the dollar” theme persist? Or will this dip simply be a chance for investors to buy the Kiwi at much cheaper levels?

The Kiwi sailed downstream on Friday, continuing its struggle from the previous day’s action. The strong current fuelled by USD buying sent the NZDUSD pair to 0.7245, a level it hadn’t hit in two weeks.

While no high impact data will be released until Thursday, don’t be quick to judge and think that NZD trading will be quiet. Be on the lookout on commodity trading, which has been pretty volatile as of late. The last few trading sessions have been rough on com-doll, as the AUD, NZD and CAD have all been taking hits. Let’s see how this develops as we enter a new week.

The Kiwi was able to recover some of last week’s losses as it soared higher against the greenback yesterday. Despite the drop in New Zealand’s visitor arrivals, the Kiwi was able to draw strength from the rise in commodity prices and the sharp rise in Canadian retail sales.

Today, no economic reports are due from New Zealand and the rest of the com-doll economies. Would the Kiwi be able to hold on to its recent gains? If the US economic reports come in better than expected, then we might see a rush of risk appetite prop the Kiwi up. The US preliminary GDP, S&P housing price index, and CB consumer confidence are some of the main events expecting to turn the heat up on the market action today.

It was another bad day for the Kiwi as it pared down most of its gains against the greenback last Monday in yesterday’s trading. The NZDUSD pair fell to a low of 0.7221 before closing at 0.7248.

The latest inflation expectation for New Zealand rose to 2.6% from 2.3%. Inflation expectation has a tendency to be ‘actual’ since laborers usually haggle for higher wages if they see that prices are going up. These ‘new’ costs will now then be transferred to consumers. The NZD got a brief lift following the report. Though, the overall pessimism in the markets kept the Kiwi down for the most part of yesterday.

New Zealand’s economic calendar is report-free today. Attention, however, will be focused on the release of the durable goods orders, new home sales, and unemployment claims in the US. Could these reports bring in some positive results? Some encouraging data, after yesterday’s downward revision in US’s 3Q GDP, would bring back some confidence in the markets. This could then be bullish for the higher yielding assets such as the Kiwi at least in the short term.

The Kiwi managed to edge up in yesterday’s trading session. It opened the Asian trading session at 0.7247 and closed the US session almost 80 pips higher at 0.7321.

The NBNZ business climate survey just released pushed the Kiwi lower though. It printed a reading of 43.4 for this month, lower than last October’s reading of 48.2. This means that businesses in New Zealand grew less optimistic about the economy. It’s still in positive territory though. Remember, zero is the “line in the sand” reading. A reading above zero means that businesses are optimistic about the future of the economy!

The only economic data left this week for New Zealand is their trade balance. The trade balance basically computes the net difference in value between imported and exported goods. A negative balance is called a deficit, which means more goods were imported than exported. A growing deficit is usually seen as bearish for the Kiwi since their export sector adds a lot to their GDP. The forecast for October is a deficit of 469 million New Zealand dollars, slightly higher than September’s deficit of 424 million.

By the way, be careful today dudes and dudettes… The US celebrates its Thanksgiving holiday and we could see some grossly exaggerated price action because of the thin liquidity.

Much like it’s com-doll siblings, the kiwi dropped in yesterdays trading action. The NZDUSD pair fell all the way down to close at 0.7157. With the pair be able to keep some of the gains it made this month?

The Kiwi was hurt by runs of risk aversion yesterday. It started off with the NBNZ business confidence index, which printed a reading of 43, 5 points lower than it’s October reading .This indicates that business managers are less confident over the economy for the next few months.

At night, New Zealand’s trade balance report was released. While the report showed that the total deficit shrank to 1.16 billion NZD from 1.67 billion NZD in October, it came up short of expectations. It was predicted that the deficit would shrink to 1.01 billion NZD. There are some concerns that the trade deficit could widen next year, as the sharp rise of the NZD could dampen exports. If this happens, I want to see how RBNZ Governor Alan Bollard will react. Perhaps an extended period of low rates?

The NZD was further hit by the news of Dubai yesterday. This sparked a run to safety, which helped the USD and JPY against other higher yielding currencies. With not much news coming out today, could we be in for more majors moves due to low liquidity? Or will ranging be the name of the game?

The Kiwi bears took a breather from selling last Friday, helping support at 0.7050 hold. The dollar rally caused by the concerns on Dubai’s debt also seemed exaggerated, which help currency traders take profits off their dollar longs.

The only significant report this week is the building consents report… which was just released! According to the report, building consents (government approvals for building construction) in October grew 11.7%, up from September’s revised up figure of 5.5%. Since getting government approval is one of the first in making buildings, an increasing in building consents usually indicates that economic activity is picking up. Currency traders see this as a sign to buy up the domestic currency as it indicates economic growth in the future.

No other significant data due for release this week… So the Kiwi would probably be primarily moved by economic data coming out of the US and other major economies in the world. With that said, watch out for the employment situation report from the US on Friday.

The Kiwi traded in a mixed fashion yesterday due to some tentativeness in global capitals markets. Still, it was able to post some marginal gains over the greenback. The NZDUSD opened at 0.7139 and closed at 0.7163.

No economic reports were due in New Zealand yesterday. Today will be silent as well in terms of economic releases.

Just across the Tasman Sea, the RBA is set to decide on its interest rates. The bank is expected to hike its rate from 3.50% to 3.75%. An increase in their rates would generally be bullish for the AUD and could also be upbeat for the NZD. Looking back at the last RBA interest rate decision, a 0.25% increase was very much priced in by the market already. So when the bank released its decision to do so, the AUD and the NZD fell. The market sold on news. It would be interesting how the market will react this time so better be on the guard!

Risk hungry traders took the Kiwi along with them yesterday, allowing the NZD to make some nice gains versus the dollar. The NZDUSD pair finished higher 0.7267, a gain of over 100 pips.

With nothing coming up over the next few days, I suggest you be wary of reports coming out from other countries that could shift risk sentiment in either direction. Take note that unemployment data from the US due over the next couple of days, so we may see lots of movement during the U session. Aside from that, be aware of commodity trading. Gold has just topped over $1,200, an all time high. If this continues to shoot higher and higher, it may bring along other commodities with it.

The kiwi dropped as risk aversion came back into play in yesterday’s trading session. The US dollar rallied across the board as US stocks fell, which hurt commodity dollars like the NZD. Still, the losses were minimal, with the NZDUSD pair dropping only 42 pips to close at 0.7224.

At 10:00 am GMT, the ANZ commodity prices m/m report is on deck. While this report doesn’t normally have a high impact on the markets, it could reflect the strong rise of currencies. As I said yesterday, gold has just topped the $1,200 mark and if it continues to rise, other commodities may just hop on board as well!

Be on the lookout for economic reports being released during the European and US sessions. The ECB will be making its interest rate decision, while during the US session, Fed chairman Bed Bernanke will be speaking. That being said, make sure you get your wet suit on - you don’t want to get cold because of all the big splashes that could be made today!

The Kiwi was caged between resistance at 0.7290 and support at 0.7215 yesterday as New Zealand had an empty economic schedule. As risk aversion dominated after the release of the US ISM non-manufacturing PMI, the NZDUSD pair was unable to make significant headway.

New Zealand’s economic calendar is report-free again for today as traders are all eyes and ears on the upcoming US NFP report. Net job losses for November are estimated to amount to 119K, which would be an improvement over October’s 190K increase in unemployment. If the actual figure fails to meet the consensus, then risk aversion might settle in and cause the NZDUSD to lose ground. Be prepared to handle the extra volatility today!

The Kiwi was caught off guard with the dollar’s blitz last Friday. The NZDUSD pair fell to a low of 0.7134 from an opening of 0.7234 before closing at 0.7156.

Like most of the anti-dollar’s, the NZD was not spared by the USD’s sudden rush. Despite the better-than-expected NFP numbers, the Kiwi still fell, and fell hard for that matter, against the dollar. Was last Friday’s ‘correlation break’ just an oddity or a start of a new the trend? We’ll find out in the coming days.

This week’s headline will be the RBNZ’s interest rate decision on December 9. Its counterpart just across the Tasman Sea has already increased their rates twice but the RBNZ remains keen from doing so. The bank is anticipated to leave their rates unchanged at 2.5%. Given its weak PPI of -1.1% for the third quarter, indeed it would be unlikely for the bank to hike its rate. The bank has maintained the same level of rate for the past five quarters, so keeping it untouched for another period could reflect negatively on the NZD.

The Kiwi edged lower initially when trading began yesterday but found some buying support once the US session rolled along. It ended the US trading session at 0.7122, just 35 pips lower from its week open price at 0.7157.

No important data from New Zealand yesterday and nothing again today but expect to see the Reserve Bank of New Zealand’s interest rate decision tomorrow at 8:00 am GMT. No change is expected with regards to the interest rate so traders will be putting more importance on the accompanying statement. Remember that the RBNZ has committed to keeping rates at current level up to the second half of 2010. If the bank mentions any change in this policy, we could see some volatile Kiwi price action.

The kiwi continues to fall of the tree, as traders have been eating more of those dollar apples the past few days. The NZDUSD pair fell to 0.7072 and is now nearing its November lows.

Risk aversion hit the markets yesterday on news coming out from Greece and Dubai. Greece’s credit rating was downgraded while a Dubai investor reported losses of $3.65 billion. Furthermore, word on the grapevine is that RBNZ Governor Alan Bollard and his buddies won’t be raising interest rates. This soured demand for higher yielding assets like the NZD.

At 8:00 pm GMT, the RBNZwill be releasing its interest rate statement. As I just said, the rate is expected to remain steady at 2.50%. It seems that unlike their Australian counterparts, New Zealand officials aren’t that optimistic over the economy. The market reaction may not be too strong as traders may begin to price this in throughout today’s trading sessions.

A rate hike come mid-2010? Well, that’s definitely a reason for the Kiwi to soar! The NZDUSD managed to recover some of its losses as it flew past the 0.7100 handle yesterday when RBNZ Governor Allan Bollard announced that rate hikes could come earlier next year.

The RBNZ held rates steady at 2.5% and said that they may have to wait until mid-2010 before implementing a rate increase. Recall that the central bank was initially expected to hike rates by the end of 2010 and the prospect of a rate hike coming sooner than expected pushed the NZDUSD higher.

Bollard also highlighted the strengths of New Zealand’s economy, noting that the country has already moved out of the recession. He credited higher demand for housing and rising commodity prices as the key factors driving the recovery. He was also quick to dismiss concerns of asset price bubbles. According to him, house prices have been climbing but consumption hasn’t picked up steam enough to form house price bubbles.

Earlier on, retail sales reported no growth for October. This was a step down from September’s 0.2% uptick in retail sales. Core retail sales rose by 0.5%.

New Zealand has no more economic reports to release for the remainder of the week but the Kiwi could keep soaring based on the RBNZ monetary policy statement. Still, keep an eye out for US data which could affect risk sentiment, particularly the retail sales data due tomorrow.

The Kiwi won another gold over the dollar in yesterday’s trading competition. It trumped the greenback with a score of 0.7280 from an opening of 0.7200.

The NZD started the Asian session on a very strong note as Reserve Bank of New Zealand Governor Alan Bollard said that the bank will start to hike rates during the mid part of next year. The target date for raising the rate was moved sooner given New Zealand’s upbeat housing market.

After rising up for the most part of the day, the Kiwi eventually consolidated during the US session as it was unable to break above the 0.7300 resistance.

No economic reports are due today in New Zealand. Though, the Kiwi can benefit also from China’s 18.2% expected growth in its industrial production. Its release will be due soon at 2:00 am GMT. Aside from Australia, New Zealand also exports raw materials to China.