The New Zealand dollar continued its winning streak as the high yield propelled the Kiwi dollar to record-highs. With the carry trade fashion in full swing, the kiwi has appreciated by about 22 percent over the past year since New Zealand?s benchmark official cash rate of 8 percent ranks second-highest after Iceland’s among sovereign nations with a Aaa rating.
[/B]- [B]Moderate Gain In Credit Card Transactions Despite Recent Interest Rate Hikes
[/B]Credit card billings managed a recovery in May as the modest gain of 0.5 percent in seasonally adjusted transactions represents an improvement over the 0.9 percent decline recorded in April.
[B]- Political Party To Press For Amendments in the Reserve Bank Act
[/B]As the effects of the June 11 intervention by RBNZ continue to ripple through the foreign exchange markets, concerns are being raised domestically about the impact of the strengthening kiwi on the export-oriented New Zealand economy. New Zealand First, a prominent political party, has suggested it may expressed intention to propose amendments to the Reserve Bank Act in order to ensure Reserve Bank monetary policy decisions take into account the interest of the export sector and the economy as a whole.
[B]- Use of Taxation Suggested As a Tool To Curb Inflation[/B]
Fiscal policy reforms are being suggested as a possible means to reduce the effect of fluctuating business cycles on New Zealand?s manufacturing sector. A press release by the Canterbury Manufacturers? Association emphasized the superiority of taxation as an anti-inflationary instrument versus export-dampening monetary policy measures.
[B]NEW ZEALAND MARKET ACTIVITY:[/B]
[B]Currency Markets - NZD:[/B]
The New Zealand dollar continued its winning streak as the high official cash rate propelled the Kiwi dollar to record-highs. With the carry trade in full swing, the kiwi has appreciated by about 22 percent over the past year since New Zealand?s benchmark interest rate of 8 percent ranks second-highest after Iceland’s among sovereign nations with a Aaa rating. The New Zealand dollar advanced against the US dollar past a 22-year high as the yield differential between New Zealand and US benchmark interest rates remained significant at 2.75 percentage points. New Zealand?s currency peaked intraday to a record-high of 76.58 cents to a dollar, the highest level since being floated in 1985. The 7.5 percent rate spread between New Zealand?s and Japanese benchmark interest rates boosted the cross of the Kiwi dollar with the Japanese yen to 94.84 yen, the highest since October 1987.
[I]USD/NZD (Daily Chart)
[B]Equity Markets - NZSX-50:[/B]
The benchmark NZSX-50 extended its decline for a second day on Friday and closed at 4285.14, down 0.3 percent or 15.42 points. As the weekly economic calendar is light, investor attention is focused on the high official cash rate and the resulting strength of New Zealand?s currency. A list of winning stocks was dominated by port companies as speculation about the sale of Auckland International Airport continued. The strength of the New Zealand dollar eroded the value of export-related stocks such as Fisher and Paykel Healthcare which fell 2c to 345, and Pumpkin Patch, down 3c to 355.
[I]NZSX-50 (Daily Chart )
[B]Fixed-Income Markets - New Zealand 10-year Government Bond Futures:[/B]
The yield on New Zealand’s December 2017 government debt declined 2 basis points to 6.76 percent. The rate differential between the benchmark 10-year note and U.S. Treasuries of the same maturity increased to 1.68 percentage points, from 1.49 points on June 12, after data about US house starts confirmed the persistence of the US housing slump.
[I]New Zealand Government Bond Futures (Daily Chart)