As expectations of a 25 basis points interest rate hike dictated bullish sentiment in New Zealand?s currency market, the Kiwi dollar scaled yet another new post-float high of 0.8110 USD in the Wellington session.
[B][U]Headlines:[/U][/B]
[B]Finance Minister Cullen Blames US Dollar for Sky-Rocketing Kiwi[/B]
As the New Zealand dollar posted astronomical gains in advance of the July 26th RBNZ interest rate decision, Michael Cullen attempted to justify currency market action by placing the blame on the across-the-board weakness of the US dollar. New Zealand?s Finance Minister maintained his stance that he may invoke his power under Section 12 of the Reserve Bank Act to alter the central bank?s objective of price stability.
[I]http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10453523[/I]
[I]Source: The New Zealand Herald[/I]
[B]Takeover Bid For Auckland International Airport Under Government Scrutiny[/B]
The NZ $2.3 billion bid by Dubai Aerospace Enterprise for control of a majority stake in Auckland International Airport Ltd will be reviewed by the New Zealand government to ensure compatibility with national interests. The offer will be examined under the national benefit issues in section 17 of the Overseas Investment Act, scrutiny well beyond what is normal for a standard business transaction.
[I]http://www.bloomberg.com/apps/news?pid=20601081&sid=aKhMOBOqBN7M&refer=australia[/I]
[I]Source: Bloomberg[/I]
[B]Several Firsts For New Zealand Dollar During 2007[/B]
The New Zealand dollar, the best-performing currency this year, has come a long way since its inception as New Zealand?s currency forty years ago, and the current year has been quite eventful for the Kiwi. Several firsts were witnessed in 2007, varying from the New Zealand dollar breaking 0.8100 USD to the Reserve Bank?s first post-float intervention in the currency market.
[I]http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10453495[/I]
[I]Source: The New Zealand Herald[/I]
[B][U]Market Activity[/U][/B]
[B]Currency Market - NZD:
[/B]
As expectations of a 25 basis points interest rate hike rule bullish sentiment in New Zealand?s currency market, the Kiwi dollar scaled yet another new post-float high of 0.8110 USD in the Wellington session. The trade-weighted index closed at 76.95, the highest level since the currency was floated on March 4, 1985, a clear indication of the strength of the currency against all five of its major trading partners. The New Zealand dollar also continued strong against its carry trade partner, the Japanese yen, peaking to a new two decade high of 97.78 versus the yen, up from Monday?s Wellington close of 96.20. Although the Kiwi?s other high-yielding partner posted record gains against a number of its crosses, the New Zealand dollar managed to outperform the Aussie to close at 0.9145 AUD versus Monday?s close of 0.9065 AUD in Wellington.
New Zealand?s Finance Minister, Michael Cullen, attempted to justify the Kiwi dollar?s astronomical gains by blaming the across-the-board weakness of the US dollar, but the comments had little effect if any on bullish currency market sentiment. The downward spiral of the US dollar barely serves as an adequate explanation of the 22.6 percent rise in the trade-weighted index since July 24 last year.
[I]NZDUSD (Daily Chart)
Source: Bloomberg[/I]
[B]Equity Market - NZSX-50 Index:[/B]
New Zealand?s bourse closed up 14.75 points, or 0.3 percent, at 4321.29, on a turnover of NZ $193.7 million, despite news that Dubai Aerospace Enterprise?s takeover bid for Auckland Airport needs to pass strict tests of government approval. Given the strategic importance of New Zealand?s main gateway, the NZ $2.3 billion bid for a majority stake in Auckland International Airport Ltd will be reviewed by New Zealand government to ensure compatibility with national interests. After posting gains of 10 cents yesterday on takeover speculation, the shares of Auckland International Airport declined 2 cents to NZ $339 at the close of Tuesday?s trading session. The losing streak in the stocks of manufacturers of export products continues in tandem with the Kiwi dollar?s ascent to one fresh post-float high after another. However, shares of Fisher & Paykel Appliances has held up resiliently against the currency?s climb, although the stock did tumble 14 cents to NZ $365.
[I]NZSX-50 Index (Daily Chart)
Source: Bloomberg[/I]
[B]Fixed-Income Market - 10-year Government Bond Yields:[/B]
Bears may have taken control of fixed-income yields during the beginning of the week. The yield on 10-year New Zealand?s government bonds declined to 6.833 percent, a slide of 5 basis points from Monday?s close of 6.838 percent. A reversal in the recent trend may be triggered if demand for relatively low-risk government debt subsides and investors flock to harvest profits from the upbeat equity and currency market.
[I]10-year Government Bonds (Daily Chart)
Bloomberg[/I]