New Zealand dollar?s retracement from its unprecedented upward trend was subject to fluctuations in investor sentiment that followed a last-minute rally in the US stock markets.
Headlines
New Zealand Stock Exchange Demands Change in Reserve Bank Act
New Zealand?s sole registered securities trading exchange, the NZX, recommended an overhaul in the national monetary policy framework in a submission to Parliament’s Finance and Expenditure Committee. The NZX suggested that the Reserve Bank Act should be altered to follow a model similar to the US Federal Reserve, in order to shift RBNZ?s focus from a CPI statistic to long-term inflation instead.
Source: The New Zealand Herald
Finance Minister Cullen Suggests Kiwi Dollar Has Reached its Peak
New Zealand?s Finance Minister, Michael Cullen, a constant critic of the Kiwi dollar?s seemingly inexorable rise? and fall from pre-float highs, disparaged the potential of a further climb by the currency. In an interview, Mr. Cullen commented that the kiwi dollar finally seems to have peaked out, and come back into not exactly sane territory, but at least not in complete Alice in Wonderland.?
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aZo3eZZDnE.w
Source: Bloomberg
Horticulture Sector Recommends Pegged Exchange Rate for the Kiwi Dollar
A representative of New Zealand?s horticulture sector called for a reversion back to a fixed currency exchange rate in order to preserve the earnings of exporters of fruits and vegetables. At an annual conference, the president of Horticulture NZ said that horticulture exports contributed NZ $2.5 billion to the national economy. However, the 30 percent annual rise increase in the Kiwi exchange rate had eroded NZ $250 million worth of growers? potential earnings.
http://www.stuff.co.nz/4149219a13.html
Source: Stuff.co.nz
Market Activity
Currency Market - NZD:
New Zealand dollar?s retracement from its unprecedented upward trend was subject to fluctuations in investor sentiment that followed a last-minute rally in the US stock markets. The NZDUSD pair hit a six-week low of about 0.7530 USD at the end of the Wellington session, but rebounded later on to consolidate above the 0.7600 USD level. Comments from the Bank of New Zealand suggested that the New Zealand dollar was finally trading close to a fair value range, estimated to be between 0.7330 USD and 0.7530 USD. Meanwhile, the Kiwi-yen pair to bounce after plunging to a two-month low of 88.60 yen.
New Zealand?s Finance Minister, Michael Cullen, a constant critic of the Kiwi dollar?s seemingly inexorable rise? predicted a continuation of the downtrend in the medium term, provided the US dollar was not weakened by further credit scares. Mr. Cullen commented that the kiwi dollar finally seems to have peaked out, and come back into not exactly sane territory, but at least not in complete Alice in Wonderland.?
The trade weighted index of Kiwi strength rose to 73.17 at 5 pm in Wellington, up from 72.64 at 5 pm on Wednesday.
[B]NZDUSD (Daily Chart)
[/B]Prepared by the DailyFX Research Team
Source: Bloomberg
Equity Markets - NZSX-50 Index:
New Zealand?s equity market attempted a recovery at the open of Thursday?s trading session, but was unable to hold on to earlier gains and hence closed down 0.5 percent. The benchmark NZSX-50 index dropped 20.19 points to close at a nearly three-month low of 4138.20, on turnover worth NZ $148 million. Declining stocks outweighed rising shares 68 to 40. The short-lived rally in the bourse possibly took lead from last-minute resurgence in US equities. After what appeared to be another down day, the Dow Jones Industrial Average surged 150.38 points, and the S&P 500 Index closed up 10.54 points.
[B]NZSX-50 Index (Daily Chart)
[/B]Prepared by the DailyFX Research Team
Source: Bloomberg
Fixed-Income Markets - 10-year Government Bond Yields:
Risk aversion remains the prevalent theme driving global market trends. Investors tread markets for riskier assets with caution, given recent evidence that the effects of the US subprime mortgage crisis have triggered losses in financial institutions across the world. As a consequence, demand for conservative government debt rose and bond yields on the benchmark 10-year note declined by 6 basis points to 6.437 percent.
[B]10-year Government Bond Yields (Daily Chart)
[/B]Prepared by the DailyFX Research Team
Source: Bloomberg