The New Zealand dollar staged a minor recovery from a six-week low against the greenback, but the gains were stifled by lingering risk aversion.
[B][U]Headlines[/U][/B]
- [B]Massively Over-Inflated? Kiwi May Decline Another 27% - Winston Peters[/B]
Foreign Minister Winston Peters commented that the New Zealand dollar was massively over-inflated? and posed an enormous cost to an export-geared economy?, despite the recent 6 percent depreciation in the currency. The NZDUSD pair made a short-lived plunge below 0.7700 USD after the Foreign Minister suggested the faltering Kiwi may decline by another 27 percent.
[I]Source: The New Zealand Herald[/I]
NZ Herald - Breaking news, latest news, business, sport and entertainment - NZ Herald - [B]July Business Confidence Takes Modest Hit to -38.5[/B]
The National Bank?s monthly survey indicated little deterioration in business outlook in July, as 38.5 percent of respondents expressed pessimism about business conditions over the coming year, unchanged from June?s reading of 37.2 percent.
[I]Source: The Dominion Post[/I]
http://www.stuff.co.nz/stuff/dominionpost/4147711a6034.html - [B]Fitch Ratings Ranks New Zealand Housing Market As Most Risky[/B]
An international study by Fitch Ratings indicated that New Zealand?s housing market is the riskiest among the sixteen developed countries surveyed. The risk rankings were granted based on two key criteria: the extent by which housing prices are overvalued and the level of household indebtedness. With the inflation-adjusted house price index up 50 percent in the past five years, New Zealand was rated fourth for overvaluation of property. New Zealand claimed the second spot for household debt vulnerability - average debt level was valued at about 160 percent of median disposable income.
[I]Source: Stuff.co.nz[/I]
http://www.stuff.co.nz/4146580a13.html
[B][U]
Market Activity[/U][/B]
[B]Currency Market - NZD:
[/B]
The New Zealand dollar staged a minor recovery from a six-week low against the greenback, but the gains were stifled by lingering risk aversion. The NZDUSD pair made a short-lived plunge below 0.7700 USD after Foreign Minister Winston Peters suggested the massively over-inflated? Kiwi may decline by another 27 percent.
The Kiwi dollar retraced from an 8-week low of 89.27 yen after a rebound in the US equity market prompted a comeback in the carry trade trend. Despite the pullback, the New Zealand dollar is set to post monthly losses of 3.8 percent against the Japanese yen, the first decline in four months. Also notable was the depreciation of the Kiwi against its trans-Tasman partner, since increased expectations of a rate hike by the Reserve Bank of Australia boosted the Aussie to NZ $1.1216, the highest since June 14.
The modest rally by New Zealand?s currency was reflected by an increase in the trade weighted index to 73.64 from 73.16 yesterday.
[I]NZDUSD (Daily Chart)
Bloomberg[/I]
[B]Equity Market - NZSX-50 Index:[/B]
New Zealand?s bourse declined for the third consecutive trading session, but the losses appeared to moderate after the 2 percent slide on Friday. The benchmark NZSX-50 index closed down 15.53 points, or 0.4 percent, at 4213.30, on a turnover of NZ $170.8 million. Rises outnumbered falls 71 to 40. Losses were led by Telecom, down 11 cents to NZ $454, after the Commerce Commission released recommendations on the proposed fee structure for access to Telecom?s local network.
Investor confidence in New Zealand?s bourse may be buoyed after a report by Boston Consulting Group suggested annual shareholder returns beat returns by its counterparts in major developed economies over the past five years.
[I]NZSX-50 Index (Daily Chart)
Bloomberg[/I]
[B]Fixed-Income Market - 10-year Government Bond Yields:
[/B]The yields on benchmark 10-year government bonds remained steady amid an apparent rebound in world equity markets. The resulting resurgence in global risk tolerance diminished demand for relatively low risk government debt.
[I]10-year Government Bond Yields (Daily Chart)
Bloomberg[/I]