The winning streak of the Kiwi dollar was slightly curbed Tuesday as the U.S. subprime mortgage crisis reverberated across the global markets. And, as a result, investors across the range of asset classes lightened their exposure to risky trades like long carry trades in favor of more conservative investments.
[B]HEADLINES:[/B]
- [B]Rising Export Prices Likely To Reduce Current Account Deficit[/B]
Global increase in the prices of commodities , in particular dairy products, is widely anticipated to contribute towards shrinking New Zealand?s quarterly current account deficit . A 17 percent quarterly rise in New Zealand?s export prices is expected to partially offset the effect of robust borrowing on the ever-widening foreign investment deficit.
Bloomberg - Are you a robot? - [B]Retail Electronic Card Transactions On The Rise[/B]
Electronic Card Transactions series data for May 2007 indicated a modest seasonally adjusted 1.1 percent increase in card expenditure, and further confirmed the dampening effect of interest rates hikes and high fuel prices on consumer confidence. The total of $4.6 billion worth of debit, credit and charge card transactions were made in May 2007 represented an overall 8.4 percent rise compared to May 2006.
Electronic Card Transactions Rise | Scoop News - [B]Housing Slump Expected To Ensue[/B]
Concerns are being raised about the possibility of a housing slump when the momentum gained by the Kiwi dollar and consumer spending loses steam. The speculation is based on the 60 percent gains in house prices in the last four years, combined with a recent Westpac Bank report that suggests the residential housing market is over-valued by about 20 percent.
http://www.stuff.co.nz/4107670a13.html
[B]NEW ZEALAND MARKET ACTIVITY:[/B]
[B]Currency Markets - NZD:[/B]
The winning streak of the Kiwi dollar was slightly curbed Tuesday as the U.S. subprime mortgage crisis reverberated across the global markets. And, as a result, investors across the range of asset classes lightened their exposure to risky trades like long carry trades in favor of more conservative investments.
The NZDUSD cross traded a local range of 0.7640 to 0.7670, but fell short of the post-floatation high of 0.7684 reached on Monday. The New Zealand dollar is expected to decline against the Japanese yen after Japan?s Finance Minister Koji Omi commented on the risks of flocking to the yen as the currency of choice to finance carry trades. One month implied volatility on New Zealand dollar options is currently at 9.80 percent, edging close to the five-year average of 11.27 percent, and may contribute to risk-aversion towards carry trades.
[I]NZD(Daily Chart)
[/I][B]
[/B][I]Source: Bloomberg[/I]
[B]Equity Markets - NZSX-50:[/B]
Amid a slowdown in global equity markets, the benchmark NZSX-50 index declined for the fourth consecutive day to close at 4252.03, down 18.88 points, or 0.4 per cent, at a turnover of 34.99 million shares valued at $127.4 million. The movements in the stock markets mainly stemmed from the continual strength of the New Zealand dollar in the currency market, on speculation of further hikes in the official cash rate by RBNZ. Taking a back seat, but present nonetheless, merger and acquisition activity was also exerting its influence on price action.
[I]NZSX-50 Index (Daily Chart)
Source: Bloomberg[/I]
[B]Fixed-Income Markets - New Zealand?s 10-year Government Bonds:
[/B]Concerns over the U.S. subprime fiasco have caused government bond yields to tumble down globally as investors flocked to the safety of more conservative assets, and the New Zealand debt market was no different. New Zealand 10-year government bond yields slid 2 basis points to close at 6.75 percent.
[I]New Zealand Government Bond (Daily Chart)
[/I][I]Source: Bloomberg[/I]