The New Zealand dollar recovered from yesterday?s nearly two-week low against the US dollar as global risk-aversion eased, allowing investors to revert to the currency trade trend.
The gains in the Kiwi dollar followed Finance Minister Michael Cullen?s comments that the pace of economic growth was unsustainably fast?, hence fueling speculation the RBNZ will retain its hawkish stance at the July 26 MPC meeting.
-[B] Manufacturing Sector Expansion Rate Slows To a Crawl in June
[/B]The ANZ-Business Performance of Manufacturing Index for June printed at 50.4, scraping the 50.0 level and hence indicative of only a modest expansion at best. The monthly PMI, lowest since January 2006, registered a steep decline from last month?s statistic of 56.8. The release further confirmed the impact on economic performance of the rally by the Kiwi dollar and New Zealand?s benchmark OCR, the second-highest after Iceland’s among sovereign nations with a Aaa rating.
- [B]Finance Minister Labels Economic Growth Rate Unsustainably Fast?[/B]
Finance Minister Michael Cullen described the pace of expansion of New Zealand?s economy as unsustainably fast?, and held unabated consumer spending and wage growth accountable for the persistent inflationary pressure. To counter the fear of inflation without further credit tightening, New Zealand?s government intends to resort to a tighter fiscal policy.
NZ Herald - Breaking news, latest news, business, sport and entertainment - NZ Herald
- [B]Farming Sector Business Confidence Buoyed By Record Dairy Prices[/B]
A survey by Rabobank Group indicated a surge in business confidence in New Zealand?s farming sector, on account of the record global prices for butter and milk powder. The proportion of farmers who expressed optimism in economic conditions over the next six months rose from 22 percent in April?s survey to 40 percent in June. The data on farming sector outlook contrasts with the results of the July 9 NZIER business opinion survey that suggested the prevalence of pessimistic business sentiment over the short-term.
Bloomberg - Are you a robot?
[B]Currency Market - NZD:[/B]
The New Zealand dollar recovered from yesterday?s nearly two-week low against the US dollar as global risk-aversion eased, allowing investors to revert to the currency trade trend. The gains in the Kiwi dollar followed Finance Minister Michael Cullen?s comments that the pace of economic growth was unsustainably fast?, hence fueling speculation the RBNZ will retain its hawkish stance at the July 26 MPC meeting. The New Zealand dollar traded at 0.7807 USD by 5 pm in Wellington, a significant rise from the one-week low of 0.7755 USD yesterday. New Zealand?s currency also appreciated to 95.49 yen, up 0.9 percent from 94.62 yen yesterday.
If data on retail sales prints a monthly increase in line with estimates, a rise in expectations of another OCR hike by RBNZ may give the New Zealand dollar a boost.
[I]NZDUSD (Daily Chart)[/I]
[B]Equity Market - NZSX-50 Index:[/B]
Absence of market-moving news from the domestic calendar led New Zealand?s stock exchange to turn to overseas market activity for direction. The US stock market regained its footing from optimism over corporate earnings reports while Asian stocks gained on prospects of increased M&A activity. The benchmark NZSX-50 index followed the upward trend and closed at 4238.54, up 0.2 percent, up 8.86 points. Turnover amounted to NZ$118.9 million and gains outnumbered losses 61 to 48. NZ Oil and Gas emerged the main winner, rising 9 cents to a record high of NZ$ 132.
The release on Friday of retail sales data for May could trigger a movement in New Zealand?s equity market, but in all likelihood the NZSX-50 will continue to consolidate in advance of next week?s consumer price data.
[I]NZSX-50 (Daily Chart)
[B]Fixed-Income Market - 10-year Government Bonds:[/B]
As global risk-aversion eases, demand for conservative government debt instruments appears to dip again, causing the yields on benchmark 10-year government notes to drop to 6.760 percent from 6.735 percent yesterday. If data on retail sales prints a monthly increase in line with estimates, expectations of another OCR hike by RBNZ may boost New Zealand?s bond yields.
[I]10-year Government Bonds