Kiwi Struggling to Retrace From One-Month Low

The New Zealand dollar continues to plummet, having declined 6.1 percent against the US dollar since reaching the post-float high of 0.8110 USD on July 24th.

[B]Building Permits Beat Expectations In June
[/B]Demand for new houses and apartments continued unabated, as issuance of building permits peaked to an 18-month high of 15.8 percent on a seasonally adjusted basis. In comparison to May, more than 90 percent of the increase in residential construction approvals stemmed from apartment approvals in June. New housing consents excluding approvals for apartments rose at a more moderate 1.4 percent from May.
[I]Source: Bloomberg[/I]

[B]Housing Boom Expected To Stall in Third Quarter[/B]
Results of a quarterly housing confidence survey by ASB Bank indicated significant rise in expectations that New Zealand?s housing boom was near an end after a five-year run. About 48 percent of survey participants anticipated housing prices to either level off or even decrease in the third quarter, whereas only 35 percent of individuals expressed similar sentiment in the second quarter.
[I]Source: The New Zealand Herald[/I]

[B]Majority of[/B] [B]Exporters Failed To Hedge Against Exchange Rate Swings[/B]f
Although New Zealand?s export sector has pinned the blame for lower earnings on the unprecedented ascent by the Kiwi dollar, an overwhelming majority of exporters failed to insure against exchange rate swings. A report by international logistics group DHL suggested that though 96 percent of the respondents surveyed were aware of currency hedging techniques, only 33 percent actually hedged their foreign currency exposure.
Exporters eschew hedging in punt on Kiwi's direction |

[B][U]Market Activity
[B]Currency Market - NZD:
The New Zealand dollar continues to plummet, having declined 6.1 percent against the US dollar since reaching the post-float high of 0.8110 USD on July 24th. As global risk-aversion continued to stoke carry trade unwinding, the Kiwi dollar traded over a wide range to plunge from 0.7647 to 0.7563 against the greenback. The Kiwi also dropped to a fresh one-month low against its perennial carry-trade partner, the Japanese yen. During early trading in Wellington, the NZDJPY pair declined to 90.30 yen, from 93.13 at 5 pm on Friday, and slid to as low as 89.21 yen during the New York session.
Given the across-the-board weakness of the New Zealand dollar, the trade weighted index declined to 73.27 at 8 am in Wellington, down from 74.72 at close on Friday.
[I]NZDUSD (Daily Chart)[/I]

[B]Equity Market - NZSX-50:[/B]

New Zealand?s NZSX-50 index closed down 17.179 points, or 0.405 percent, at 4228.828, a modest decline compared to the recent losses posted by its overseas counterparts. The down day for New Zealand?s bourse came as no surprise after lingering subprime woes led the DJIA and S&P to close on Friday with weekly declines amounting to 4.2 percent and 4.9 percent respectively.
The stock of Auckland International Airport rose 1 cent to NZ $333, yet remained short of the NZ $380/share value of the cash and scrip offer from Dubai Aerospace Enterprise.

[I]NZSX-50 Index (Daily Chart)


[/I][B]Fixed-Income Market - 10-year Government Bonds:

[/B]Demand for New Zealand? government debt remained high amid no signs of respite from global risk-aversion. Indexes that track credit-default swaps in Europe and the US peaked to all-time highest, suggestive of escalating perceptions of risk associated with corporate debt. Yields on New Zealand?s 10-year government bonds dropped 5 basis points to 6.64 percent.

[I]10-year Government Bond Yields (Daily Chart)